Debt snowball vs avalanche?

[frugalredhead]

So I have been using the Vertex debt spreadsheet and I LOVE it! Since we started paying off our credit card debt last January, I have been of the mindset that I didn't want to give these credit card companies a dime more than I have to, so I've been doing the debt avalanche (slightly modified). I am mostly going in order of interest rate, although I have a couple of cards with almost identical interest rates so out of those I am doing smallest balance first. This has our CC debt paid off in June 2017 with paying $9798 in interest. It will be September 2015 before my next card is paid off, and then 11 months until the next one. Things will move pretty quickly after that, but it is a long time coming.


Doing the snowball, I will have a card paid off every 6 months, which sounds much more motivating. However, total interest paid will be $10,482. Almost $700 more.

What are your expert opinions? I am torn between, as I said, minimizing my interest paid, and needing that little push every 6 months when a card is paid off. Thanks for reading!

[disneysteve]

It really depends on you.

Can you stay motivated paying highest interest rate first knowing that you're saving hundreds of dollars in the process? If so, keep doing that.

If not seeing cards disappear entirely is going to throw you off course, knock out a few little ones first. You could then go back to the better route.

Another option is to stop looking at each card individually. Instead, make a little graphic - like a thermometer - showing your total debt. Hang it on the fridge or over your desk and every time your balance goes down $500, put a sticker on the meter. Let your motivation be seeing your total indebtedness dropping regardless of which card is happens to be on.

[frugalredhead]

Steve, you sound just like my husband! I do keep a spreadsheet where I tally our CC debt every month, and I do get some motivation by seeing it go down. I've been at this for a year now, and have only paid off one credit card, and I feel like maybe my motivation is starting to falter. I'm not really sure which way is better for me. Of course, my card with the lowest balance is also the one with the lowest interest rate, but I would have that knocked out in 5 months. The one I am working on now would only take a couple of months longer and is my highest interest rate. I may keep focusing on the one I am doing now, and then knock out the little one to give myself a motivational boost. Just wanted to see what other people have done. Thanks!

[disneysteve]

I may keep focusing on the one I am doing now, and then knock out the little one to give myself a motivational boost.

As with many questions that get posed here, there are usually more than 2 options. Doing a little of both methods just may be what works best for you. It sounds like you're on the right track.

[LittleMissSplendid]

I think this is why I decided to avalanche until a particular high interest debt was paid off and then switch to snowball to knock out some little debts. I was still feeling like I wasn't getting anywhere despite that high interest debt rapidly shrinking. Then I finally paid it off and was like..... was that it?

I definitely need more motivation to keep going and snowballing some little debts will help because instead of looking at overall debt total I look at numbers of debts. Meaning I would feel way more motivated knowing I went from having 20 debts to 17 debts (regardless of amounts/interest) than knowing I went from 20k in total debt to 17k in total debt. Maybe that's weird, but somehow it seems different.

[MKKShah]

Avalanche makes sense numbers wise. But do not underestimate the psychological advantage of a snowball. Unlike you have prohibitively high rates (like 20% or so) on a particular debt, I would go with snowball, and not bother with a 1 or 2 % difference in interest rate.

I would also use a modified snowball. Let's say you have 5 debts 1K, 5k, 1K, 2K, and 1K. I may attach the 5K, and bring it down to say 2.5K, and then start with snowball.

[TheKayla]

I go back and forth personally. I have an extra payment applied to my highest monthly loan, but then if I have some extra cash to throw at debt, it usually ends up going towards a smaller debt or debt I hate the most -- just for motivation. Its kept me sane over the years of repayment thus far. I've paid off three of my smallest loans this way by doing here and there payments on top of a minimum monthly payment.