Run month by month on four illustrative debts, the two methods finish on the same day, and the price of the snowball's early wins can be stated in pounds.
On four illustrative debts totalling 17,200, with 650 a month to spend on them, the debt avalanche (highest interest rate first) pays 3,148 of interest, and the debt snowball (smallest balance first) 3,459: a difference of 311. Both are debt-free in month 32. What the snowball buys for its 311 is a first cleared debt in month 6 instead of month 9.
Worked in full in Personal Finance for Beginners by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
The argument between the two methods is usually conducted in principles: maths against motivation. It is better conducted in money. Run month by month on a realistic set of debts, the cost of choosing motivation turns out to be a number small enough to decide on.
| Debt | Balance | Interest rate (APR) | Minimum payment | First month's interest |
|---|---|---|---|---|
| Overdraft loan | 1,200 | 9.9% | 40 | 9.90 |
| Store card | 2,100 | 29.9% | 65 | 52.32 |
| Credit card | 5,400 | 22.9% | 135 | 103.05 |
| Car loan | 8,500 | 6.9% | 210 | 48.88 |
| Total | 17,200 | 450 |
The monthly budget is fixed at 650: the 450 of minimums plus 200 found in the budget. Minimums are held at their starting amounts, so when a debt is cleared its payment is not spent elsewhere but rolls on to the next target. Interest is charged monthly at the APR divided by twelve.
Illustrative only. The debts, rates and budget are invented to show the mechanics. Real cards add fees, promotional rates and minimums that change with the balance, none of which is modelled here. This is not advice on any individual's debts; a regulated debt adviser or free debt charity can look at a real situation.
Each month: balance = balance × (1 + APR ÷ 12) − payment
Payment = minimum on every debt, plus all remaining budget to the target debt
Snowball target: smallest balance. Avalanche target: highest APR.
In Excel, one column per debt and one row per month: =MAX(0,B5*(1+APR/12)-MIN(Min,B5*(1+APR/12))) for the minimum, then a target column that adds Budget-SUM(minimums paid) to whichever debt the method picks. The interest column is =B5*APR/12, summed at the end.
The two methods disagree from the first month. The snowball starts on the overdraft loan, the smallest balance at 1,200 but one of the cheapest at 9.9 per cent. The avalanche starts on the store card at 29.9 per cent. That disagreement is what gives the comparison something to measure.
| Month each debt is cleared | Snowball | Avalanche |
|---|---|---|
| Overdraft loan | 6 | 25 |
| Store card | 13 | 9 |
| Credit card | 26 | 24 |
| Car loan | 32 | 32 |
| Total interest paid | 3,459 | 3,148 |
| Total repaid | 20,659 | 20,348 |
The avalanche saves 311, which is 9.9 per cent of its own interest bill, or 9.73 for each month of the plan. It does not finish sooner: the car loan, last in both orders, sets the end date, and both plans clear it in month 32.
What the 311 buys. The snowball clears a whole debt in month 6 and a second in month 13. The avalanche's first win comes in month 9, and its second, the credit card, waits until month 24. If seeing accounts close is what keeps you paying for 32 months, 311 is a reasonable price. If a missed month would cost more than that, it is cheap.
| Extra a month | Months | Snowball interest | Avalanche interest | Difference |
|---|---|---|---|---|
| 100 | 40 | 4,701 | 4,316 | 385 |
| 200 | 32 | 3,459 | 3,148 | 311 |
| 400 | 23 | 2,321 | 2,116 | 205 |
Two things stand out. First, the gap between the methods shrinks as the extra payment grows, because a larger surplus clears every debt fast enough that the order matters less. Second, the amount you pay dwarfs the method you choose: moving from 200 to 400 a month extra saves 1,032 of avalanche interest and nine months, more than three times what any choice of order is worth. With no extra at all, and only the freed-up minimums rolling over, the same debts take 55 months and cost 7,489.
The table also shows why the plan matters more than the method once it is under way: each extra 100 a month shortens it by several months and takes more interest out than any reordering of the same payments could.
The common mistake is to treat the choice of method as the big decision. On these debts it is worth 311; the size of the monthly surplus is worth thousands. The second mistake is to assume the methods always disagree. Small balances and high rates often travel together, typically on a store card, and when the smallest debt is also the dearest both methods attack it first. List your debts both ways before arguing about which philosophy to follow.
The third mistake is to let minimums fall as balances fall. Card minimums are often set as a percentage of the balance, so they shrink each month, and if you pay only what is asked the rollover that drives both methods never happens. Fix the total you pay each month and keep it fixed. Why a shrinking minimum traps a balance, and why rolling freed minimums into the next debt is worth more than the choice of order, is worked on a different set of debts in what a minimum payment actually does; this piece takes that rollover as given and measures only the gap between the two orders, and the case for keeping a small cash buffer during the plan in how much your emergency fund should be.
On 17,200 of debts and 650 a month, the avalanche costs 3,148 of interest and the snowball 3,459, and both are done in month 32. The avalanche is the cheaper order when the order makes no difference to whether payments continue; the snowball makes sense where early wins do, at a cost of about 311 in this example. Either way, the extra amount you find each month matters more than the order. The free workbook for this book runs both methods on your own debts and tells you whether they actually disagree.
In practice yes, or equal, when the monthly budget is the same, because it sends every spare pound to the debt charging the most. The question is by how much. On 17,200 of illustrative debts with 200 a month extra, the avalanche saves 311 of interest over 32 months, about 9.73 a month, and both plans finish in the same month.
Far more than the choice of method. On the same illustrative debts, 100 a month extra clears them in 40 months with 4,316 of avalanche interest; 200 extra takes 32 months and 3,148; 400 extra takes 23 months and 2,116. Doubling the extra from 200 to 400 saves 1,032, over three times the 311 gap between the methods.
When the smallest balance is also the most expensive debt, both attack it first, and the methods only differ later, if at all. Store cards often combine a small balance and a high rate. Check your list before choosing: if the two orders start with the same debt, the argument about methods is worth little.
This article is one calculation from Personal Finance for Beginners. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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