Debt avalanche vs. snowball: which method gets you out of debt faster

If you have more than one debt (a card, a loan, installments on an appliance), paying "a bit of each" is usually the worst strategy. The two most common methods for ordering them are the avalanche and the snowball. Both work the same at their core: you pay the minimum on everything, and whatever is left in your budget goes entirely to one "target" debt. The difference is which one you pick as the target.

Avalanche method: by interest rate

You attack the debt with the highest rate first, regardless of size. Once it's paid off, you move that freed-up money to the next highest rate, and so on until you're done.

Advantage: it's mathematically the cheapest way out: you pay less interest overall.
Disadvantage: if the highest-rate debt is also the biggest, it can take months to see the first result, which discourages some people.

Snowball method: by balance

You attack the smallest balance first, regardless of rate. Paying it off quickly gives you a visible win, and you move that money to the next smallest balance.

Advantage: you see results fast, which helps keep the habit going when discipline is hard to sustain.
Disadvantage: overall you end up paying more interest than with the avalanche.

Example with three debts

Say you have these three debts, with a ₲1,000,000 monthly budget to pay them all (minimums included):

In this example, both methods take the same time, but the avalanche saves you around ₲207,000 in interest. The bigger the rate gap between your debts, the more that advantage shows up.

So which should you pick?

• Pick the avalanche if paying less interest matters most to you and you can keep the discipline even if progress takes a while to show.
• Pick the snowball if you've tried to "get organized" before and it didn't stick: seeing a debt disappear quickly helps you keep going.
• A third path: start with the smallest debt to build momentum, then switch to the avalanche for the rest.

Three things before you choose a method

1. List every debt with balance, rate and minimum payment. You can't order what you haven't written down.
2. Never stop paying a minimum to send more money to your target debt: that puts another debt into default and adds penalty charges.
3. Stop new purchases on credit while you're paying down. If you keep using credit, the hole doesn't get smaller.

When refinancing beats picking a method

If you have an expensive debt (say, a card at 19.62%) and can get a personal loan at a clearly lower rate, it sometimes makes sense to pay off the card with that loan and keep a single, cheaper payment. It only makes sense if the new rate is truly lower and you don't go back to using the card you paid off.

Try it with your own numbers

Load your real debts into the debt calculator and see how long it takes and how much interest you pay with each order. Adjust the monthly budget to see the effect of paying a bit more.

Frequently asked questions

Can I mix both methods?

Yes. Many people start with a small debt for motivation and then switch to rate order for the rest.

What if I can't afford all the minimums?

Talk to your creditors before defaulting: some offer refinancing or a payment plan. Defaulting usually costs more than renegotiating in time.

Is it worth using savings to pay off a debt?

It depends on the debt's rate versus your savings' return. If the debt costs more than your savings earn (say, a CDA), it usually makes sense to pay the debt, keeping a minimum emergency fund.

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This article is educational, not financial advice. The example amounts are hypothetical.

Sources

• Central Bank of Paraguay (BCP), maximum effective annual rates for loans and cards in guaraníes, October 2026.