Debt Avalanche vs Debt Snowball: Which Payoff Strategy Works?

# Debt Avalanche vs Debt Snowball: Which Payoff Strategy Works? If you have multiple debts — credit card, personal loan, home loan — you need a systematic payoff strategy. Two methods dominate: avalanche and snowball. ## Debt Avalanche Pay minimum on all debts. Throw every extra rupee at the highest-interest debt first. Once it is paid, redirect to the next highest. **Mathematically optimal.** You pay the least total interest. Typically best for disciplined savers. ## Debt Snowball Pay minimum on all debts. Throw every extra rupee at the smallest-balance debt first. Once it is paid, redirect to the next smallest. **Psychologically superior for many people.** Quick wins build momentum. Research shows higher completion rates for people who use snowball vs avalanche — because behavior matters more than math when you are in debt. ## The Numbers On ₹10 lakh total debt with a ₹30,000/month repayment capacity: - Avalanche typically saves ₹40,000–80,000 in interest - Snowball may take 2–4 months longer The gap narrows as interest rates converge. If your highest-interest debt also has the smallest balance, both methods are the same. ## When to Use Which - **Avalanche:** You are motivated, disciplined, and the interest rate spread across debts is large (credit card at 36% vs home loan at 8.5%). - **Snowball:** You have multiple small debts that feel overwhelming. The psychological relief of closing accounts matters to you. ## High-Interest First Is Non-Negotiable Regardless of method: credit card debt at 36–42% APR must be eliminated before any discretionary investing. The guaranteed return of paying off 36% debt exceeds any equity return.