Pay off student loans

Debt Snowball vs. Debt Avalanche: Pay Off Debt the Right Way

debt snowball vs. debt avalanche

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Are you ready to ramp up student loan repayment? Here are two strategies that could help: the debt snowball method and the debt avalanche method. Both are effective approaches to paying off debt faster, but they work a little differently. Here’s what you need to know about the debt snowball vs. debt avalanche method, along with tips on how to choose the strategy that works for you.

Debt snowball vs. debt avalanche

Before we get into how the debt snowball and debt avalanche methods are different, let’s consider how they’re similar.

Both approaches ask you to keep paying the minimum on all your debts while ramping up repayment on a single “focus debt.” Once you’ve paid that single focus debt off completely, you’ll move on to the next.

You’ll keep up this process until (fingers crossed, knock on wood) all your loans are paid off completely. The main difference between the debt snowball and debt avalanche is how you choose which loans to focus on first.

What’s the debt snowball method of debt repayment?

Popularized by Dave Ramsey, the debt snowball method asks you to pay off debts with the smallest balances first. Let’s say you owe three different student loans. The first has a remaining balance of $4,500 at a 3% APR, the second has a balance of $2,000 at a 5% APR, and the third has a balance of $10,000 at 7% APR.

With the debt snowball method, you’d line your loans up in order from the smallest balance to the biggest.

Amount owedInterest rate
Focus debt #1$2,0005% APR
Focus debt #2$4,5003% APR
Focus debt #3$10,0007% APR

Then, you’d make extra payments on your $2,000 student loan until you close it out completely. After that, you’d move on to the loan with the next highest balance (of $4,500) and finally focus on tackling the $10,000 loan.

As mentioned, you’ll keep making minimum payments on all your debts so that you’re making progress and not falling behind. But you’ll throw extra money at your smallest debt first to pay it off completely.

According to Ramsey and other proponents of the debt snowball method, this approach works because it motivates you to keep going. When you completely pay off a debt, you’ll feel excited to keep going.

It can also help if you’re holding a bunch of different loans and aren’t sure where to start. By paying off some debts in their entirety, you’ll be able to cut through the clutter and simplify your situation.

Note that refinancing or consolidating student loans is another way to simplify repayment, as it can combine multiple loans into one.

What’s the debt avalanche method?

While the debt snowball method asks you to line up your loans in order from the smallest to the biggest balance, the debt avalanche has you look at interest rates.

Let’s again consider these three student loans. With the debt avalanche, you’d list out your loans according to their interest rates, from highest to lowest.

Amount owedInterest rate
Focus debt #1$10,0007% APR
Focus debt #2$2,0005% APR
Focus debt #3$4,5003% APR

This approach makes the most mathematical sense, because it will save you the most interest over the long run. However, you might not get that psychological boost of closing an account out completely as quickly as you would with the debt avalanche.

After all, it’s going to take a lot longer to pay off your $10,000 student loan than your $2,000 one. But with the interest collecting at 7% on this loan vs. 5% on the $2,000 one and 3% on the $4,500 one, the debt avalanche could save you more money.

Which approach is right for you?

When it comes to the debt snowball vs. debt avalanche, one is not better than the other in every situation. Instead, it depends on what debt you’re paying off and what strategy you find more motivating.

If you’re dealing with credit card debt on top of student loans, for example, it could make sense to use the debt avalanche method and tackle your credit cards first, since credit cards tend to have sky-high interest rates.

But if your interest rates don’t have a huge difference, it might be better to go with the strategy that feels more motivating.

After all, paying off debt isn’t just about the numbers. You also have to find ways to motivate yourself when it feels like the road is long and tough and you owe money everywhere you look.

So if the debt snowball method helps you make progress toward your goals, stick with that. Or if the debt avalanche works because you want to save the most you possibly can on interest, it could be the better choice.

In the end, you need to find the strategy that works for you and stick with it until your debts are completely paid off. And don’t forget to give yourself credit for all your hard work along the way!

What’s next?

Are you working on paying off student loans? Here are effective strategies for paying off student loans ahead of schedule.

Want to lower the interest rate on your student loans? Head to this guide to learn how student loan refinancing could help.

Want better rates? Here are the best banks to refinance student loans:

Variable rates start at...Fixed rates start at...Repayment termsWelcome bonus Check your rates
refinance student loans4.54%4.49%5 - 20 years$200Visit LendKey
refinance student loans4.99%4.47%5 - 20 years$200Visit Earnest
refinance student loans4.22%3.97%5, 7, 10, 15, and 20 years$120Visit Laurel Road
refinance student loans4.53%4.40%5 - 20 years$100 or $200, depending on the amount you refinanceVisit Credible
refinance student loans5.09%4.74%5, 7, 10, 15, and 20 years$100Visit SoFi
refinance student loans4.53%4.83%5, 7, 10, 15, and 20 years$100Visit ELFI