Avalanche vs Snowball: We Calculated Which Debt Payoff Method Wins

You've got multiple debts. Credit cards, car loan, maybe a personal loan. You want out. But which payoff strategy actually works best?

We ran both methods through our Debt Payoff Calculator with real numbers. The results reveal something interesting: the "best" method depends on more than just maths.

The Two Methods Explained

The Avalanche Method (Maths-Optimal)

Pay minimum on everything, then throw extra money at the highest interest rate debt first.

How it works:

1. List debts by interest rate (highest to lowest)
2. Pay minimums on all debts
3. Put every extra dollar toward the highest-rate debt
4. When that's paid off, roll that payment to the next highest rate

The Snowball Method (Psychology-Optimal)

Pay minimum on everything, then throw extra money at the smallest balance first.

How it works:

1. List debts by balance (smallest to largest)
2. Pay minimums on all debts
3. Put every extra dollar toward the smallest balance
4. When that's paid off, roll that payment to the next smallest

We Ran the Numbers: A Real Scenario

Using our Debt Payoff Calculator, here's what happens with a typical Australian debt profile:

The Debts:

Total Debt: $38,300 Extra Monthly Payment: $450

Avalanche Results (Highest Rate First):

• Order of payoff: Credit Card A → Credit Card B → Personal Loan → Car Loan
• Total time to debt-free: 38 months
• Total interest paid: $5,678
• First debt eliminated: Month 12 (Credit Card A)

Snowball Results (Smallest Balance First):

• Order of payoff: Credit Card B → Credit Card A → Personal Loan → Car Loan
• Total time to debt-free: 40 months
• Total interest paid: $6,234
• First debt eliminated: Month 5 (Credit Card B)

The Verdict:

Run your own comparison →

Why Avalanche Doesn't Always Win

The maths is clear: Avalanche saves money. So why does anyone use Snowball?

The Psychology Factor

Research from behavioural economists found that people who paid off accounts faster (Snowball) were more likely to eliminate all their debt. The early wins created motivation.

The uncomfortable truth: The best debt payoff strategy is the one you actually stick with.

***** If you've tried Avalanche and given up, Snowball might save you more money in practice—even if it costs more in theory.

When Snowball Beats Avalanche

1. You need motivation - If you've failed at debt payoff before
2. Similar interest rates - If rates are within 2-3% of each other
3. Many small debts - Quick wins reduce accounts to manage
4. High stress levels - Fewer debts = less mental load

When Avalanche Is the Clear Winner

1. One debt has a much higher rate - 20%+ credit card vs 7% car loan
2. You're highly disciplined - Numbers motivate you more than wins
3. Large high-interest debt - Waiting costs serious money
4. You've done this before - You know you'll stick with it

The Hybrid Approach: Best of Both

Here's a strategy financial advisers often recommend:

Step 1: Knock out one small win first

Pay off your smallest debt for an instant motivation boost.

Step 2: Switch to Avalanche

Attack the highest interest rate debt with everything you've got.

Step 3: Stay the course

Use automation to remove willpower from the equation.

Using our example:

1. Pay off Credit Card B first ($3,100) - Done in 5 months
2. Then attack Credit Card A ($8,200) - The 20.99% killer
3. Roll everything to personal loan, then car loan

Result: Quick win psychology + optimal maths after month 5.

Real Scenarios: Which Method Should You Use?

Scenario A: High-Rate Credit Card Debt

Your situation:

• $14,000 on a 22.99% APR credit card
• $7,000 on a 19.99% APR card
• $5,000 car loan at 5.99%

Recommendation: Avalanche

The 22.99% card is costing you $3,219/year in interest. Every extra dollar toward that card is earning you 22.99% guaranteed.

Scenario B: Many Small Debts

Your situation:

• $1,200 Afterpay (0% but due soon)
• $2,500 credit card at 18.99%
• $3,000 personal loan at 12.99%
• $4,200 credit card at 20.99%

Recommendation: Snowball or Hybrid

Four accounts is a lot to manage. Clear that Afterpay first, then consider Snowball for the mental relief of fewer accounts.

Scenario C: HELP Debt + Consumer Debt

Your situation:

• $45,000 in HELP debt (indexed to CPI)
• $10,000 on credit cards at 21%

Recommendation: Avalanche (focus on the credit card)

HELP debt in Australia is different from consumer debt. It's indexed to inflation (not interest), only repaid when earning above the threshold, and doesn't affect your credit score. That credit card is the real emergency—attack it first.

! Unlike consumer debt, HELP loans don't compound with high interest. Focus your extra payments on high-interest consumer debt first.

The Numbers Don't Lie: More Comparisons

We ran multiple scenarios through our calculator:

Low Debt, Similar Rates

Insight: With similar rates and lower balances, the difference is small. Go with whatever keeps you motivated.

High Debt, Varied Rates

Insight: With varied rates and higher balances, Avalanche saves thousands. Worth the discipline.

Calculate your exact savings →

Your Action Plan

Step 1: List All Your Debts

Include balance, interest rate, and minimum payment for each.

Step 2: Calculate Both Scenarios

Use our Debt Payoff Calculator to see the actual numbers.

Step 3: Assess Your Psychology

Be honest: Will you stick with the optimal plan, or do you need quick wins?

Step 4: Pick Your Strategy

• Big rate differences + discipline = Avalanche
• Need motivation + similar rates = Snowball
• Not sure = Hybrid (one quick win, then Avalanche)

Step 5: Automate Everything

Set up direct debits so you don't rely on willpower.

Common Mistakes to Avoid

1. Only Paying Minimums

Minimum payments are designed to keep you in debt forever. A $10,000 credit card at 20% with minimum payments takes 25+ years to pay off.

2. Not Including All Debts

Be honest about everything: credit cards, store cards, Afterpay/Zip, car loans, personal loans.

3. Ignoring 0% Balance Transfers

That 0% balance transfer card? It's not really 0%—the rate jumps to 21%+ when the promotional period ends. Plan accordingly.

4. Raiding Your Emergency Fund

Don't put your emergency fund toward debt. One surprise expense puts you right back on credit cards.

5. Stopping at 90%

The last debt feels endless. Push through. The final payoff is the most important one.

The Bottom Line

Avalanche saves more money. Snowball creates more motivation.

For most people with significant high-interest debt, Avalanche is the mathematical winner. But if you've failed at debt payoff before, Snowball's quick wins might be worth the extra interest.

The real answer? The best method is the one you'll actually finish.

Run your numbers:

• Debt Payoff Calculator - Compare Avalanche vs Snowball for your debts
• Savings Goal Calculator - Plan what to do with your payments after you're debt-free

The day you make your last payment, none of this debate will matter. You'll just be free.