Debt Snowball vs Debt Avalanche: Which Is Better?

 

 

Introduction

Being buried in debt is like carrying a heavy burden—it restricts your financial freedom and increases stress. But choosing the right strategy can help you become debt-free faster and smarter. Today, we’ll discuss two popular debt repayment strategies:

• Debt Snowball Method

• Debt Avalanche Method

In this guide, you’ll learn:
✔️ Which method is more effective for you
✔️ Pros and cons of each approach
✔️ Real-life examples to help you choose the right one

Studies show that 80% of people don’t know the right debt repayment strategy, leading to higher interest payments and wasted time. Let’s find out how to pick the best method for you!

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1. Debt Snowball Method: Pay Off Smallest Debts First

How It Works?

With this method, you:

1. List debts from smallest to largest (not by interest rate)

2. Focus on paying off the smallest debt first

3. Once a debt is cleared, apply its payment to the next debt

Example:

Approach:

• First, pay off Credit Card 1 (₹20,000)

• Then the Personal Loan, and finally the Car Loan

Pros of Debt Snowball:

✅ Boosts Motivation – Quick wins keep you encouraged
✅ Easy to Follow – No complex calculations needed
✅ Reduces Number of Debts – Gradually eliminates multiple debts

Cons of Debt Snowball:

❌ May Cost More in Interest – Larger debts keep accumulating interest
❌ Can Take Longer – If big debts have high interest

Who Should Use It?

• Those who need quick wins for motivation

• People with many small debts

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2. Debt Avalanche Method: Pay Off Highest-Interest Debts First

How It Works?

With this method, you:

1. List debts by interest rate (highest to lowest)

2. Focus on paying off the highest-interest debt first

3. Once a debt is cleared, apply its payment to the next debt

Example:

Approach:

• First, pay off Credit Card 1 (18% interest)

• Then the Personal Loan (12%), and finally the Car Loan (8%)

Pros of Debt Avalanche:

✅ Saves More on Interest – Long-term cost-effective
✅ Faster Debt Freedom – Eliminates high-interest debt quickly
✅ Mathematically Efficient – Minimizes total repayment

Cons of Debt Avalanche:

❌ Requires Patience – Takes time to see progress
❌ Less Motivational – No quick wins

Who Should Use It?

• Those who want to minimize interest costs

• People with large high-interest debts

• Individuals comfortable with number crunching

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Debt Snowball vs Debt Avalanche: Which is Better for You?

Mathematical Example:

Assume you can pay an extra ₹10,000/month toward debt.

Debt Snowball:

• Credit Card 1 paid in 4 months

• Personal Loan paid in 10 months

• Total time: 14 months, Interest paid: ~₹25,000

Debt Avalanche:

• Credit Card 1 paid in 4 months

• Personal Loan paid in 8 months

• Total time: 12 months, Interest paid: ~₹20,000

Verdict:

• If you need quick motivation → Debt Snowball

• If you want maximum interest savings → Debt Avalanche

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Bonus Tips: How to Pay Off Debt Faster

1. Increase Income: Freelancing, part-time jobs

2. Cut Expenses: Cancel unnecessary subscriptions

3. Refinance Debt: Convert high-interest loans to lower rates

4. Use Bonuses/Windfalls: Apply tax refunds or gifts toward debt

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Final Words

Both Debt Snowball and Debt Avalanche are effective—the best choice depends on your financial behavior. The key is to pick a method and stick with it.

Which method will you use? Comment below!

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