# Snowball or avalanche? Two ways to clear debt

> One method is cheaper, the other is easier to stick to. The difference exists because paying off debt is half arithmetic and half endurance.

You have several debts at once — a credit card, an instalment plan, money
borrowed from family — and some spare cash each month. Which one do you
overpay?

There are two answers and both make sense.

## Avalanche: highest interest first

The avalanche method sends every spare zloty at the debt with the **highest
interest rate**, while the rest get minimum payments only. When the most
expensive one is gone, the whole surplus moves to the next in line.

This is the arithmetically optimal choice. Interest accrues on the balance,
so every unit of currency thrown at a debt costing 18% saves exactly that —
and always more than the same unit thrown at one costing 7%.

With several debts at clearly different rates — a credit card next to a
mortgage — the difference runs into the thousands.

## Snowball: smallest balance first

The snowball method ignores interest rates and closes the **smallest balance**
first. Then the next smallest, and so on.

Arithmetically this is worse. You will pay more interest, sometimes noticeably
more. But it answers a different problem: clearing debt takes years, and for
most of that time nothing visible happens. The balance falls slowly, the sense
of progress fades, and the plan gets abandoned.

Closing the first debt in three months instead of the first in two years is a
concrete change: one payment less to track, one reminder less in the calendar,
proof that the plan works.

## Which to pick

A practical rule:

- If the spread in interest rates is **large** — a dozen percentage points
  between the most and least expensive — avalanche wins and the gap is too big
  to ignore.
- If the rates are **close together**, avalanche gains little while snowball
  delivers quick closures. Then the choice is obvious.
- If you have already abandoned a payoff plan once, pick snowball regardless of
  the arithmetic. A method you stick to beats an optimal one you do not follow.

## A third way

Nothing stops you starting with snowball and switching to avalanche. Close one
or two of the smallest debts to see the effect, then reorder by interest rate.

You give up some of the savings and gain a real chance the plan survives its
first six months.

## What neither method fixes

Both assume you are **not taking on new debt**. Overpaying a credit card you
keep using is pouring water into a bucket with a hole — the balance returns,
and the interest with it.

Before choosing a method, spend a month writing down where the money actually
goes. Very often the surplus available for overpayment turns out to be larger
than you thought — or non-existent, in which case the order of repayment is
not the problem.

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