Forgot password?

Snowball Debt vs Avalanche Debt: Which Debt Strategy is Best?

Household debt surpassed £2 trillion last year as Brits grappled with energy costs, supermarket prices and the cost of living crisis.

The burden of managing multiple debts, each with its own set of interest rates and repayment terms, can be overwhelming and stress-inducing. Those in debt need effective strategies to reduce their debt load and chart a clearer path towards financial freedom.

In this context, the decision to adopt a structured debt repayment approach is not merely a financial one. It is a deeply personal journey towards regaining control over one’s financial future.

Two widely recognised strategies in this journey are the snowball and avalanche methods, each offering a distinct blueprint for tackling debt. In this blog post, we dive into each method and explore whether they are right for you.

What is the Debt Snowball Method?

The debt snowball method is a repayment strategy that focuses on paying off debts in order from the smallest to the largest balance, regardless of interest rates. This approach encourages individuals to make the minimum payment on all their debts while allocating extra money to pay off the smallest credit card debt or loan first.

Once the first debt is paid off, the money used for that debt is then rolled over to the next smallest debt, creating a "snowball effect" as the payments towards each subsequent debt become larger.

Pros and Cons of the Snowball Debt Method



What is the Avalanche Method?

In contrast, the debt avalanche method prioritises debts by interest rates, targeting the highest-interest debt first while making minimum payments on others. Once the highest-interest debt is paid off, the extra money is then directed to the next highest-interest debt. This debt repayment plan is designed to save money on interest payments over time, making it a financially efficient strategy.

Pros and Cons of the Avalanche Method



Which Debt Method is Best for You?

Choosing between the snowball and avalanche debt repayment strategies depends on personal preferences, financial situations and psychological needs.

If you are seeking quick wins and motivation, use the debt snowball strategy to pay off your smallest debts first. It offers psychological encouragement and a structured path to debt freedom.

However, the avalanche method is likely better for those focused on financial efficiency. It prioritises paying off debts to minimise interest payments, potentially accelerating the overall debt repayment process.

Regardless of the method you chose, the key to success lies in staying consistent with payments, being disciplined about not accruing more debt, and possibly consulting with a personal finance expert for tailored advice.

Tools like credit counselling, personal loans for debt consolidation, and budget adjustments can also support either of the strategies. Ultimately, the best approach is the one that fits with your financial goals and personal preferences and ensures progress towards becoming completely debt free.

More Information

How to Stay Out of Debt

Can I pay more than the minimum payment?

How to receive free debt advice

For more helpful information about how to manage your money, different financial products or what we do at Polar Credit, take a look at our Info Hub.