Debt Avalanche vs Snowball

The two methods

Both methods follow exactly the same procedure. They disagree on one thing: which debt goes first.

1. 1Pay the minimum on every debt, every month. This is not optional — missed minimums trigger fees and penalty rates that dwarf any optimisation.
2. 2Send every spare euro to one target debt, and only that one.
3. 3When the target clears, roll its entire payment — minimum plus extra — into the next debt in the order.

Avalanche orders the debts by interest rate, highest first. Snowball orders them by balance, smallest first. That is the whole difference.

Two worked examples

The abstract argument for avalanche is airtight and tells you nothing about whether it matters for you. Here are two real simulations, both with €300 extra per month above minimums.

Case one: a typical mixed debt load.

Both methods clear the debt in the same month. Choosing the mathematically optimal order saves €85 in interest — around €2 a month, spread over more than three years. That is a rounding error against the discipline required to keep going for 40 months.

Case two: one large balance at a much higher rate. Same idea, different shape, €250 extra per month.

Here snowball is a genuinely expensive mistake. It spends its early months clearing three small, cheap debts — including one at 0% — while a €14,000 balance compounds at 26% in the background. Avalanche finishes four months sooner and saves over three thousand euros, on a debt load barely larger than case one.

How to tell which case you are in

You do not need to simulate anything. Sort your debts by balance and look at where the highest rate sits.

• Highest rate sits on one of your largest balances → this is case two, where the gap between methods is real money.
• Highest rate sits on one of your smallest balances → the two methods produce nearly the same order anyway, so the choice barely changes the outcome.
• All rates within a few percentage points of each other → this is case one. The gap will be small enough that the ordering is not what determines the result.
• One debt above roughly 20% → the interest on it outruns almost any ordering argument, so where it sits in the queue dominates the total cost.

Why snowball keeps winning anyway

Avalanche is optimal on paper and yet snowball keeps outperforming it in practice. Research on how people actually repay debt has repeatedly found that closing individual accounts — regardless of their interest rate — is a strong predictor of whether someone sticks with a repayment plan at all.

The reason is not mysterious. Avalanche can mean eighteen months of payments with nothing visibly finished, because the highest-rate debt is often also the largest. Snowball produces a completed debt within weeks. Progress you can see sustains behaviour; an optimal spreadsheet does not.

The failure mode that actually costs people money is abandoning the plan — reverting to minimums, or adding new debt — not choosing a suboptimal order. Weigh the €85 accordingly.

Middle grounds people use

The question is usually posed as a binary and rarely treated as one. Some of the blended approaches commonly described:

• Clearing one small debt first for the visible progress, then following strict avalanche order for the rest — capturing most of the motivation and nearly all of the interest saving.
• Treating anything above roughly 20% as a separate category to be dealt with before the ordering question applies at all.
• Ordering by balance in general, but promoting any debt whose rate sits far above the others.
• Refinancing or a 0% balance transfer, which changes the rates themselves rather than the order — though the transfer fee and the risk of re-using a cleared card both bear on whether it comes out ahead.

Factors that matter more than the ordering

Several things affect the outcome more than the choice between the two methods, and none of them are captured by either:

• A cash buffer. Without one, the next unexpected bill tends to return to the card that was just cleared, resetting the plan regardless of ordering.
• Continued borrowing. No repayment order survives balances that keep growing; this dominates every other variable.
• Early repayment penalties. Some fixed-rate loans charge for overpayment, which directly reduces the benefit of targeting them and can change which order costs least.
• The rates themselves. Refinancing or consolidation changes the interest rate rather than the sequence, and cutting a 26% rate to 9% moves the total more than any ordering decision can.