There are lots of ways to get into debt, but two popular ways to pay it off. They are commonly known as the debt avalanche and the debt snowball.
Mathematically speaking, a debt avalanche (also known as “debt stacking”) is likelier to pay off debts in a shorter time and save you the most money on interest. This payoff method targets debts with the highest interest rates first.
If you need short-term victories to inspire you, you’re a debt snowball candidate. If you tend to be analytical and patient, a debt avalanche may appeal to you.
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Debt avalanche calculator
Use this debt calculator to see how much time and money you could save using this strategy. Enter the details of your debts (excluding your mortgage), including interest rates and minimum payments.
Then make a budget to see how much more you can put toward your debt each month to accelerate your payoff.
Toggle between avalanche and snowball to compare the two strategies on total costs, interest paid and payoff time.
If you can’t pay off your unsecured debts, such as credit cards and personal loans, in five years or less, you may need to investigate options for debt relief.
Using the debt avalanche strategy
Proponents of the debt avalanche approach include NerdWallet columnist Liz Weston. “You’ll get out of debt more quickly by going after toxic debt first,” she says. “On the other hand, if you truly don’t think you’ll succeed without making small victories, a debt snowball is way better than doing nothing at all.”
Oftentimes, people can address their debt by creating a budget and sticking to it, which frees up cash to implement an avalanche debt-payoff strategy. Once you’ve got a handle on what you owe and where you spend, it’s time to start on the avalanche.
Oftentimes, people can address their debt by creating a budget and sticking to it.
Add up all the minimums you must pay on your debt — ordered from the highest interest rates to lowest — and then figure out how much extra you can pay beyond the total of your minimums.
Let’s say you have a hospital bill for $300, and the hospital is allowing you to pay on it interest-free. You also have a credit card balance of $2,500 at 22.9% interest and another of $5,000 at 15.9%.
That $2,500 credit card balance becomes your top priority, because it carries the highest interest rate. If you can put an extra $200 over your total minimums to pay off debt, it will go to that one until it is paid off. Then you add that debt’s minimum to the $200 extra, and put the total toward the bill with the second-highest interest rate.
Continue knocking off debts and rolling their minimums into the extra debt payment amount until all debts are repaid. If a promotional interest rate ends, you may have to reorder your debts to keep your focus on the one with the highest rate.
Both an avalanche and a snowball use money you’ve committed to pay off debt. Sometimes, though, you happen across “extra” money, like a rebate check or a full jar of change. You can supplement either payoff strategy by using that found money to further chip away at debts (the “snowflake” method).
Is the avalanche method for you?
Although avalanche may be your cheapest and most logical route to becoming debt-free, you may have to wait a long time to feel the triumph of zeroing out a debt — especially if your highest-interest debt is also the largest.
You can build a spreadsheet to track your progress, but a debt payoff calculator, like the one above, can do all of those steps for you automatically. It gives you the emotional payoff of watching your debt shrink, too.
That’s important. If you grow weary of the sacrifices you’re making to pay off debt, you may decide it’s not worth the effort and quit. If you do that, all the money that you were going to save won’t matter.
Updated Feb. 7, 2018.