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Debt Payoff Calculator: Snowball vs Avalanche Method
Debt Payoff Calculator
Your Debts
Snowball Method
Pay off smallest debts first for psychological wins
Avalanche Method
Pay off highest-interest debts first to save money
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See which method works better for your situation
Debt Payoff Results
Debt Payoff Strategies: Snowball vs Avalanche Method
What is the Debt Snowball Method?
The debt snowball method is a debt reduction strategy where you pay off debts in order of smallest to largest balance. After paying the minimum on all debts, you put any extra money toward the smallest debt first. Once the smallest debt is paid off, you roll that payment amount into the next smallest debt, creating a "snowball" effect as you eliminate each debt.
What is the Debt Avalanche Method?
The debt avalanche method is a debt reduction strategy where you pay off debts in order of highest to lowest interest rate. After making minimum payments on all debts, you put any extra money toward the debt with the highest interest rate. Once that debt is paid off, you move to the next highest interest rate debt, minimizing the total interest paid over time.
Which Method is Right For You?
Both methods have their advantages:
- Snowball Method Benefits: Provides psychological wins by eliminating debts quickly, which can help with motivation and staying on track.
- Avalanche Method Benefits: Saves more money on interest payments over time and typically results in becoming debt-free faster.
Research shows that the snowball method often works better for people who need motivation to stay on track, while the avalanche method is mathematically optimal for saving money.
Tips for Successful Debt Payoff
Regardless of which method you choose, these tips can help you succeed:
- Create a budget: Track your income and expenses to find extra money for debt payments
- Reduce expenses: Look for areas where you can cut back to free up more money for debt repayment
- Increase income: Consider side hustles or overtime to accelerate your debt payoff
- Avoid new debt: Stop using credit cards while paying off existing debt
- Celebrate milestones: Acknowledge your progress to stay motivated
Frequently Asked Questions
The avalanche method typically saves more money in interest payments because it targets high-interest debt first. However, the difference may be small if your debts have similar interest rates.
Yes, the snowball method can be very effective for people who need psychological wins to stay motivated. Research has shown that the feeling of progress from paying off smaller debts can help people stick to their debt payoff plan.
Some people use a hybrid approach, starting with the snowball method to build momentum and then switching to the avalanche method for larger debts. The most important thing is to choose a method you'll stick with.
Any amount helps, but try to allocate at least 10-20% of your income toward debt repayment if possible. Even small increases in your payments can significantly reduce your payoff timeline.
It's generally recommended to have a small emergency fund ($1,000-$2,000) while paying off debt to avoid going further into debt for unexpected expenses. Once you have this basic emergency fund, focus on debt repayment.