Guide
Avalanche or snowball: a debt payoff plan with the math shown.
Two well known ways to pay off debt, what each one costs in a real example, and how Budvo turns either into a plan with a debt-free date you can trust.
Updated
The avalanche method
Pay the minimum on every debt, and put every extra dollar toward the debt with the highest interest rate. When it's gone, roll its payment into the next highest rate. Avalanche saves the most interest and usually gets you out of debt soonest, because your extra money always goes where it costs you most.
The snowball method
Pay the minimum on every debt, and put every extra dollar toward the smallest balance. When it's gone, roll its payment into the next smallest. Snowball gives you quick wins, and for many people those wins are what keep them going. It can cost more interest when the small debts have low rates.
An example
Three debts and $600 a month for all of them together:
| Debt | Balance | APR | Minimum |
|---|---|---|---|
| Personal loan | $1,500 | 6.00% | $50 |
| Card B | $3,000 | 21.99% | $90 |
| Card A | $6,000 | 28.99% | $180 |
Each month, both methods pay every minimum and put the rest of the $600 on one debt. Avalanche starts with Card A, the highest rate. Snowball starts with the personal loan, the smallest balance.
| Avalanche | Snowball | |
|---|---|---|
| Debt free in | 22 months | 23 months |
| Interest paid | about $2,320 | about $2,950 |
| First debt paid off | month 16 | month 5 |
Here avalanche saves about $630 and finishes a month sooner. Snowball clears its first debt eleven months earlier. Either one beats paying only the minimums.
The example assumes interest charged monthly, fixed minimum payments and the same $600 every month. Budvo works with your real numbers, day by day.
How Budvo plans it
- Avalanche by default, because it saves the most. For a promo APR that ends soon, it uses the rate that's coming, not the 0% you have today.
- Real interest math: daily interest, average daily balance and minimum-only loans you'd rather not prepay.
- Prefer snowball? Switch, and Budvo shows what it costs in dollars, so the choice is yours with the numbers in front of you.
- A debt-free date and countdown, plus the interest you save, which updates whenever your plan changes.
- Every paycheck plan sends what's left after bills, buffer and goals to the debt your strategy picks, so the plan and the date always agree.
- Extra money finds its way in: spend match, round-ups and no-spend days fill the jar, and you smash it into the debt your plan pays first.
Credit cards, student loans, auto and personal loans and BNPL plans all fit in one plan.
Which one should you pick?
If you'll stick with it either way, pick avalanche. If you need early wins to stay motivated, snowball is a perfectly good choice; the best plan is the one you finish. Budvo shows you both, side by side, with your own numbers.
Questions
Good to know
Is the avalanche method always cheaper?
With the same monthly amount, paying the highest rate first almost always costs the least interest. The usual exception is a 0% promo with deferred interest that ends soon, which is why Budvo plans with the rate that's coming, not today's 0%.
How does Budvo handle 0% promo APRs?
You enter the promo rate and its end date. Budvo plans with the post-promo rate when the end is close, treats deferred interest as a cliff, and warns you if a balance would be left when the promo ends.
Does it work with student loans?
Yes. Student, auto and personal loans each keep their own rate and minimum. Mark a loan minimum-only if you'd rather not pay it early, and Budvo sends extra money elsewhere.
How is the debt-free date worked out?
Budvo simulates your pay, bills, interest and payments day by day. The same engine builds your paycheck plans, so the plan and the date always agree.
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