Why I Chose the Debt Avalanche Method to Pay My Debts

As the new year starts up, so does the debate about the best way to pay your debts. There are a myriad of debt reduction strategies, but the debate rages on and centers around the two primary options: using the Debt Snowball method versus the Debt Avalanche method. Each method works well when someone puts up the appropriate effort to pay down their debts. I am not here to preach one way over the other because I believe each are great methods. I am here to tell you why I chose the Debt Avalanche method to pay down my over $50,000 of credit card debt.

No matter what type of debt you have, the first step to getting out is to stop accumulating more debt. If you have a spending problem, then cut up your cards. If you have a shopping problem, then stop going to stores. You will never succeed paying your debt if you don’t take care of the original cause of your problem. After you stop accumulating debt, you will need to understand the severity of your debts. For me, it was all credit card debt. I had 6 credit cards totaling over $50,000. I accumulated my balances by funding my business along with a bout of frivolous spending. I wrote all of my debt down on a whiteboard because I am a visual person.

Going Small or Going Big

As I wrote all of my debt down on my whiteboard, I also listed their balances, due dates, interest rates, and minimum payments. This tactic gave me the ultimate perspective into my debt. My next step was to decide whether to roll with the snowball or jump in with the avalanche. Here is my breakdown on how I came to my decision to use the Debt Avalanche.

Exit Emotion

Using the debt snowball method is touted due to its ability to meet the emotional aspect of money. You are pressed to list your debts ascending by balance owed. You then pay the minimum payments for all of the debts except for the smallest balance. The smallest balance loan should have any extra money you have applied to the loan. For example, if you have 2 loans, one with a $15,000 balance and one with a $5000 balance, you would start working on the $5,000 balance first.

You pay the smallest balance first because you will be able to pay off that debt quickly. The quicker you are able to pay off the loan, the better you will feel about your debt repayment plan emotionally. Emotions run our lives, especially when it comes to our money. I wanted to take the emotional aspect out of my debt decisions. I figured that since emotions got me into my debt mess, I needed to take emotions out of the picture in order to get out of debt.

Enter Mathematics

While I am an emotional person, I am also very number oriented. I can’t say that I like math, but I respond to it well. I can debate with emotion, but I can’t debate with math. Math is either right or wrong. The Debt Avalanche method leaves emotion at the door and focuses on mathematics.

If you are not familiar with the Avalanche method, here is a quick breakdown. You start by listing your debts descending by interest rate. For my example above, let’s say that your $15,000 balance has an interest rate of 19.99% and your $5,000 balance has a rate of 13.99%. You would work on tackling the $15,000 debt first. While it might take a longer time to pay down that debt, it will save you money with regard to interest paid.

Comparison Example

I can talk about these two methods all that I want, but I figured it would be better to show you. I went to a great snowball versus avalanche calculator and entered my example debts above. This is what I got back.

Debt Snowball

debt snowball image 1

debt snowball image 2

With the Debt Snowball method, you will see that you will be debt free by June of 2018. After it is said and done, you will have paid $12,712 in just interest alone. Now, let’s check on the Avalanche method.

Debt Avalanche

debt avalanche image 1

debt avalanche image 2

Using the debt avalanche method, you will be out of debt by February 2018 and have paid $10,728 in interest alone.

Putting Math Over Emotion

When I first calculated my debts using Unbury.me, it opened my eyes into how much interest rate affects my overall debt. In my example above, you will finish paying off your debt 4 months earlier and save $1,983 worth of interest. When you are paying down debt, you don’t want to pay more than you have to. You also want to be done as quick as possible. This is why the Debt Avalanche method makes sense. It takes the emotion out of paying down your debt and replaces it with simply mathematics.

If you are about to embark on a debt reduction plan, I would highly recommend checking out a calculator to see which method will work for you. Each person has to select which method would work best for them and which one they will continue until their debt is paid off. Neither method works unless you are dedicated to it 100%!

About the Author

By , on Jan 31, 2013
Grayson is the owner of Debt Roundup, a personal finance blog dedicated to helping everyone get out of debt. Grayson dug himself out of $50,000 worth of credit card debt and has started to gain positive net worth. Check him out at Debt Roundup.

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  1. Michelle says:

    I really enjoyed the examples that you used to show the difference in interest payments. Unfortunately for me I am still driven by emotion and doing the smallest to largest debt payoff right now. It could change later but I needed to experience some success first!

  2. That is some whopping huge debt you paid of. I know it feels wonderful. Avalanches are extremely powerful in nature. I’ve never seen one in motion but have seen plenty just after. That is a great debt pay off name.

  3. That’s awesome to you paying down so much debt Grayson. I’m actually in the process of paying a little credit card debt down myself and I would have to say that the part about sttop adding more debt is the toughest part for me since I use the one card as a gas card, but once you’ve stop the bleeding per say it’s a lot easier to deal with your debts.

  4. Great examples – I love how you have real numbers to the two methods. I can see why so many people choose the debt snowball; there’s just so much emotion behind it. But the debt avalanche definitely seems like the better method. In the end, whichever one helps you keep paying off your debt is the one to choose – even if you spend more money on interest, at least you did it!

  5. Jose says:

    Overall my preference is the debt avalanche method. You can’t argue with math and it is the most efficient way to tackle debt. My debt strategies tend to be a hyberid of the two. By that I mean that I’ll use the avalance method but when one of my smaller debts get to the point where they are really small, I’ll target that one to get it out of the way and apply the funds that were paying for it towards the higher interest debt. That may not work for everyone, how you chose to tackle your debt is really an individual and personal decision.

  6. Laurie says:

    Grayson, THANK YOU for this timely post! We just did our January recap. We’ve always been big believers in the snowball, for emotional purposes, but after doing our January recap and seeing how much more money we gave the higher interest card, we were considering switching to the Avalanche method. Now, after reading this post, we will definitely be switching. The part about taking emotion out of the game and focusing on the numbers really hit us. Thank you, thank you!

  7. Very cool to read this. The snowball totally worked for me, but the math does not lie. I am emotionally driven and need “quick wins” to get going, but diffirent strokes for different folks!

  8. I am a big fun of math over emotion, but some people are just emotional and there is nothing you can do about it. We went with the avalanche method as well to save some money!

  9. I love your explanation on the snowball method. Math really does open eyes sometimes. Other times, it is all emotional. I for one am taking the $0 budget method I just came up with. I have only one cc with debt on it, so everything I have is going towards it, but I am still not happy. I have a payoff date of April 2013, so I am going to enact the $0 budget so all money goes towards debt. I want it gone bad.

  10. To see it all laid out in front of you can really help you to see the best way forward. I think I’d prefer to tackle the higher interest debts first. Great post Grayson!

  11. Good point and counter-intuitive. I will check how it works but you have to be aware that dfifferent credit cards in particular calculate interest in different ways. Crazy I know but in the UK, Which! magazine reckoned there were 14 different ways! So be careful that you are modelling the correct way the interest is calculated.

    On two of my cards from MBNA (BoA), monthly interest charged on a fairly static balance varied by up to 25%. When I questioned them on this, they dodged and weaved and never sent me a proper breakdown but I inferred from limited printed information gleaned by that the month length was varying from 4 to 5 weeks (ie 28 to 35 days, hence the 25%) rather than 28-31 days while the daily interest rate was calculated at simple interest at a yearly rate (ie 365.25/12 days per month) yet the rate quoted was based on compounding up from the monthly figure. This had the effect of ratcheting up the interest in a ‘long’ month. Other cards were pretty constant.

    We consolidated all our credit card debt in a large secured loan and that will be paid off finally tomorrow!!!!!

  12. I’m always doing the math especially if it is something big we owe money on. It makes sense to see which would cost you more over the long term and get rid of it. Sometimes the math scares me enough to work even harder at getting rid of it.. hence… see ya mortgage!! oh ya!

  13. Thanks for sharing your thoughts on this! This is a really useful and detailed breakdown of each method!

  14. I always lean toward the emotion side, because most people I’ve worked with respond much better to the small wins than the total interest saved. They’re just empty number when you feel helpless and stuck in a (debt) rut. But if I were to do it again with my debt payoff, I would do the Avalanche, because I’ve learned quite a bit, and realized that I did lose a bit of money to interest by starting smaller first.

  15. I think you nailed it. Tackling debt needs to be very much emotion focused, I mean that’s what got us into debt in the first place, right (I need this iPod NOW)? If it were for mathematics we would have never put ourselves in debt in the first place (because it makes no sense!).

    Snowball is we did it in my house, it gives you the feeling of accomplishing something.

    • Debt RoundUp says:

      I am glad that the snowball method worked for you. Yes, emotions are what get you into debt and that is why I wanted to take them out of the equation entirely. The numbers don’t lie and I feel better that I was able to pay off my debt 7 months sooner by using the Avalanche method, plus it saved me nearly $5k in interest savings.

  16. Mackenzie says:

    It’s quite interesting to see the difference between the avalanche and snowball methods. The comparison in savings of time and interest is eye-opening.

  17. I’m using the ready for zero calculator…it’s good to see these kinds of things to really calculate your interest. An eye-opener.

    • Debt RoundUp says:

      That is a great tool and I think helps people stay motivated. I understand the emotional motivation of paying off a small debt, but I like saving money and emotion is what messed me up in the first place.

  18. Pauline says:

    Those calculators are very handy to help put emotions back in check. I have a hard time too not being emotional, but the avalanche method sure make mathematical sense and when you see the savings there is no arguing.

  19. AverageJoe says:

    I like the idea of math over emotion. The reason the snowball method works has nothing to do with math, it’s the idea of little wins. I think this is why sites like ReadyForZero can be helpful. By having it in front of you graphically, you’re able to see progress as you cut.

  20. That’s awesome. How you chose to repay your debt doesn’t matter as much as the fact that you chose to repay it in the first place. Great job!

  21. I love doing the calculations for things like this that involve massive amounts of compound interest over time.

    I normally get a bonus from work each year that goes straight into our mortgage as a lump sum payment. It really helps to reduce our overall interest repayment.

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