Worked example

Say you owe $6,000 on a credit card at 22.9% APR (minimum $150), $12,000 on a car loan at 7.5% (minimum $320), and $4,000 on a personal loan at 13% (minimum $120). Your minimums total $590 a month, and you can add $200 extra — a fixed budget of $790. The avalanche method throws that extra $200 at the 22.9% credit card first because it is the most expensive debt, while still paying the minimums on the other two. The moment the card is gone, its $150 minimum plus the $200 extra — $350 — rolls onto the next-highest-rate debt, and so on. Because you never reduce the total budget, each cleared debt makes the next one disappear faster, which is why the line on the chart curves downward more and more steeply.

Snowball vs avalanche — which should you use?

Both methods use the same monthly budget; they differ only in the order debts are attacked. The avalanche targets the highest interest rate first, so it always pays the least total interest and is mathematically optimal. The snowball targets the smallest balance first, clearing whole debts quickly for a motivating sense of progress. Research on real borrowers has found that the quick wins from the snowball can help people stick with the plan, and a method you actually finish beats a cheaper one you abandon. If the interest difference between the two (shown above) is small, the snowball is often the smarter behavioural choice; if it is large, the avalanche keeps more money in your pocket. The single biggest lever in either case is the size of your extra payment — even a modest increase can cut years off the timeline.

Related calculators

Work out a single loan's repayment with the loan / EMI calculator, plan a home loan or refinance with the mortgage calculator, redirect freed-up cash into the savings goal calculator, grow it long-term with the investment return calculator, or organise your monthly cash with the budget planner.