Snowball vs. avalanche for your debts
Both pay the same each month. Only the order changes, and with it the interest.
| Plan | Debt-free in | Interest |
|---|---|---|
| AvalancheYou | 2 years 1 month | $1,941.33 |
| Snowball | 2 years 1 month | $2,021.73 |
| Minimums only | 4 years 4 months | $4,499.63 |
“Minimums only” pays each debt its own minimum and nothing more.
The order your debts are paid off
| # | Debt | Paid off |
|---|---|---|
| 1 | Store card | Month 6 (April 2027) |
| 2 | Medical bill | Month 12 (October 2027) |
| 3 | Credit card | Month 19 (May 2028) |
| 4 | Car loan | Month 25 (November 2028) |
What are the debt snowball and debt avalanche methods?
The CFPB describes two basic ways to pay down debt. The highest interest rate method (avalanche) pays off your costliest debt first. The snowball method pays off your smallest debt first, so you see progress sooner.
Source CFPB · How to reduce your debt ↗
Either way, keep paying the minimum on every debt and put your extra money on the first debt on your list. When that debt is paid off, move its whole payment (minimum plus extra) to the next one.
Source CFPB · Your Money, Your Goals: Reducing debt worksheet (PDF) ↗
How to calculate debt payoff
Here it is with your numbers:
- Monthly budget: $150.00 + $40.00 + $250.00 + $50.00 + $200.00 = $690.00.
- Avalanche list (highest rate first): Store card, Credit card, Car loan, Medical bill.
- Month 1 interest on Store card: $1,200.00 × 27% ÷ 12 = $27.00.
- Every debt gets its minimum, and the rest of the budget goes to Store card. It is paid off in month 6 (April 2027), then its whole payment moves to the next debt on the list, until every debt is paid in month 25 (November 2028).
- Total paid: $14,800.00 owed + $1,941.33 interest = $16,741.33.
It means the avalanche method saves you $80.40 in interest compared with the snowball method.
Source Microsoft Support · NPER function ↗
Many cards charge interest daily, so your statements can differ by a few dollars.
Source CFPB · How does my credit card company calculate the amount of interest I owe? ↗
FAQs
Is debt avalanche or snowball better?
The CFPB says paying the highest rate first (avalanche) can save you money in the long run, while the snowball method shows progress sooner but may cost more. Pick the one that keeps you going; the table above shows the difference for your debts.
Does the debt snowball really work?
Yes, if you keep paying the same total each month: when a debt is paid off, its whole payment moves to the next smallest. The CFPB notes you may pay more in total, because the costliest debt is not first.
Source CFPB · Your Money, Your Goals: Reducing debt worksheet (PDF) ↗
How long will it take to pay off $30,000 in debt?
It depends on your rates and monthly payments. $30,000 at 20% APR paid at $1,000 a month takes 3 years 6 months and costs $11,934.95 in interest.
How to pay off $30,000 in debt in 1 year?
With no interest, $30,000 ÷ 12 = $2,500 a month. At 20% APR you need $2,779.04 a month. Above, raise the extra payment until you are debt-free in 12 months.
Sources
- CFPB: How to reduce your debt
- CFPB: Your Money, Your Goals: Reducing debt worksheet (PDF)
- CFPB: How does my credit card company calculate the amount of interest I owe?
- Microsoft Support: NPER function
- Microsoft Support: PMT function