The Debt Snowball vs. Debt Avalanche Method: Which One Works for You?

Paying off debt can feel like climbing a steep mountain. With multiple loans or credit card balances piling up, it’s easy to feel overwhelmed. That’s where two strategies—the Debt Snowball and Debt Avalanche methods—come in. Both are designed to help you regain control of your finances, but which one suits you better? Let’s break them down!

Suppose you have three debts: a credit card balance of ₹10,000 at 18% interest, a personal loan of ₹30,000 at 14%, and another credit card balance of ₹50,000 at 24%. In this scenario, the Debt Snowball approach means starting with the least among the three debts regardless of the interest rates on these debts. Why? The very first knocked-out balance brings about an immediate win in confidence and motivation. You would pay off the ₹10,000 balance first, then the personal loan, and finally, the bigger balance of ₹50,000.

The Snowball approach is magic for people who need to feel progress being made. Every debt that gets cleared feels like a mini-victory to keep you energised into the next one. On the other hand, the downside may be that while enjoying these small victories, the other higher-interest debts would just sit there, building more interest that would cost them more in the long run.

Now, let's see the Debt Avalanche method turn the tables. Instead of attacking the balance that has the smallest amount, you attack the one carrying the biggest interest rate. Why? It is because getting rid of high-interest debt saves you money in the long run. Continuing the same example above, he would start with the ₹50,000 balance at 24%, then go to the ₹10,000 one at 18%, and lastly the personal loan at 14%.

This approach is perfect if you are eager to minimise the overall paid interest and become debt free sooner.

But here's the thing: it feels slower when using the Avalanche method. With an extremely high-interest, really big balance, it's gonna take a little longer; and if you really thrive off of small quick victories that keep you going, it is less satisfying.

Now, the question is, how will you know which one to go for? It all comes down to your personality and what will keep you going. You should probably go with the Snowball method if you are that kind of person who has got to see progress to keep the commitment. If you are all about efficiency and want to save money, the Avalanche method is wiser. No matter the strategy, there are some general tips that make paying off debt a whole lot easier. First, make a budget. Understand where exactly your money goes every month, and you'll find out where you can cut back and redirect funds to debt repayment. Consolidating debt can be a real game-changer. Most Indian banks offer balance transfer options or consolidation loans that lower your overall interest rate, making life so much easier on your road to repayment. Less smart-automate your payments. So, set up automatic payments to cover at least the minimum due, penalty-free, and, when possible, automate extra payments toward the debt you are targeting. This minimises the chances of missing payments and keeps you on track. And remember to build up an emergency fund. Life has a way of throwing curveballs, and having three to six months of living expenses saved up can keep you from slipping right back into debt when those unexpected costs pop up.

Conclusion

There’s no right or wrong method. The Debt Snowball is great for motivation through quick wins, while the Debt Avalanche is ideal for tackling high-interest debt and saving money. The key is to choose the method that suits you and stay consistent. With each payment, you’re one step closer to financial freedom. Take the first step and stay committed — the goal is within reach.

In the next chapter, we’ll discuss how to use credit cards wisely without falling into debt. Stay tuned for practical tips on avoiding credit card debt while maximising your card’s benefits.