SNOWBALL VS AVALANCHE, WHICH DEBT REPAYMENT STRATEGY IS BETTER?
By Vanessa Nalugo Kalunda Marketing & Communications Officer at Ntende Finance Ltd
Getting out of debt is not only about finding extra money to make repayments. It is also about having a strategy. When you have several debts at the same time, a personal loan, mobile money loan, credit card loan, salary advance, overdraft, or money borrowed from friends and family, it can be difficult to know where to start. Should you pay off the smallest debt first? Or should you attack the debt charging you the highest interest?
Two of the most popular debt repayment strategies are the Debt Snowball Method and the Debt Avalanche Method. Both can help you become debt free. The major difference is which debt you prioritize first.
So, which one is better?
The answer depends on your financial situation, your personality, and what will keep you motivated enough to stay committed to the plan.
Let’s take a closer look.
What is the Debt Snowball Method?
The Debt Snowball Method involves paying off your debts from the smallest balance to the largest balance, regardless of the interest rate.
You continue making the minimum required payment on all your debts, but any extra money you have available for debt repayment goes toward the smallest debt. Once that debt is completely paid off, you take the money you were paying toward it and add it to the payment for your next smallest debt. The process continues until all your debts are cleared.
Example
Imagine you have these four debts:
Debt Balance Interest
Mobile Money loan UGX 300,000 10%
Personal loan UGX 1,500,000 18%
Business loan UGX 2,500,000 25%
Credit card loan UGX 5,000,000 15%
Under the Snowball Method, you would focus on;
- UGX 300,000 mobile loan
- UGX 1,500,000 personal loan
- UGX 2,500,000 business loan
- UGX 5,000,000 business loan
You continue paying the required amounts on the other debts while putting as much extra money as possible toward the UGX 300,000 debt. Once it is cleared, the money previously going toward it is added to the payment for the UGX 1.5 million debt.
Why is it called a “snowball”?
Think about a snowball rolling down a hill. It starts small, but as it rolls, it becomes bigger and gains momentum. The same thing happens with your debt payments.
You start by eliminating a small debt. Once it is gone, you have more money available to attack the next debt. Your payments become larger and larger as you move through your debt list.
What are the advantages of the snowball method?
- You get quick wins
One of the biggest advantages of the Snowball method is psychological. Paying off a large debt can take years. Paying off a small UGX 200,000 or UGX 300,000 debt might take only a few weeks or monthly. Seeing a debt disappear can give you the motivation to continue.
- It makes your debt situation feel more manageable
Having five or six outstanding debts can feel overwhelming when you eliminate one completely, your list becomes shorter. Instead of thinking, “I have six debts left”, you can start thinking, “I have only five debts left”. That change in mindset can make a big difference.
- It creates momentum
Once you pay off your first debt, you take the payment you were making toward it and add it to the next debt. This means your repayment amount grows as you progress.
- It can help people who struggle with motivation
Personal finance is not purely mathematical. Knowing that particular debt has the highest interest rate does not automatically make someone disciplined enough to keep paying it.
If small victories keep you motivated, the snowball method may be more effective for you.
What are the disadvantages of the Snowball method?
The biggest criticism of the snowball method is that it does not prioritize interest rates. You might pay off a small debt with a relatively low interest rate while continuing to carry a much larger debt with a very high interest rate. As a result, you could potentially pay more interest over the entire repayment period than you would with the avalanche method.
Example
Suppose you have;
- Debt A: UGX 300,000 at 10%
- Debt B: UGX 3,000,000 at 30%
The Snowball method tells you to pay debt A first because its balance is smaller. Mathematically, however, debt B is costing you much more interest. That’s where the Debt Avalanche method comes in.
What is the Debt Avalanche method?
The Debt Avalanche method prioritizes debts based on their interest rates, rather than their balances. You start by identifying the debt with the highest interest rate. You continue making minimum payments on all your debts, but put any extra money toward the debt with the highest interest rate.
One that debt is completely paid off, you move to the debt with the next highest interest rate. You continue like that until everything is paid off.
Using the previous example:
Debt Balance Interest
Mobile loan UGX 300,000 10%
Personal loan UGX 1,500,000 18%
Credit card loan UGX 2,500,000 25%
Business loan UGX 5,000,000 15%
The Avalanche order would be:
- Credit card loan – 25%
- Personal loan – 18%
- Business loan – 15%
- Mobile loan – 10%
You attack the most expensive debt first.
Why is it called the “Avalanche Method”
An Avalanche starts at the top and gains force as it moves downward. The debt Avalanche works similarly. You start by attacking the debt that is causing the greatest financial damage through interest. Once it is eliminated, you redirect the money toward the next most expensive debt. The goal is to reduce the amount of interest accumulating along the way.
What are the advantages of the Avalanche Method?
- You can save money on interest
This is the biggest advantage. By attacking the highest interest debt first, you reduce the amount of time that expensive debt remains outstanding. Depending on the size and interest rates of your debts, this can potentially save you significant money.
- It is mathematically efficient
If your primary goal is, “I want to pay the least amount of interest possible”. The Avalanche method is generally the better strategy, assuming the debts don’t have unusual fees, penalties, or other terms that change the calculation.
- It can help you become debt free faster
Because you can prioritize the debts that grow most quickly through interest, the Avalanche approach can reduce the overall cost of your debt.
- It teaches you to pay attention to the cost of borrowing
The Avalanche method encourages borrowers to look beyond the amount they owe. A UGX 500,000 loan is not necessarily cheaper than a UGX 2M loan. What matters is also how much it costs to borrow the money.
What are the disadvantages of the Avalanche method?
The biggest disadvantage is that it can be psychologically difficult. Your highest interest debt might also be your largest debt. You could spend months making extra payments without completely clearing a single debt. For someone who needs visible progress to stay motivated, this can be frustrating.
For example, imagine you have;
- Debt A: UGX 200,000 at 8%
- Debt B: UGX 4,000,000 at 30%
The Avalanche method tells you to focus on the UGX 4 million debt. But after several months, you may still have a large balance. Meanwhile, the UGX 200,000 debt could have been eliminated quickly. This is where personal behaviour matters.
The mathematically optimal strategy is not always the psychologically easiest strategy.
Snowball Vs Avalanche, the key difference
The simplest way to remember the difference is;
Snowball = smallest balance first. You can focus on the debt you can eliminate fastest.
Avalanche = highest interest first. You focus on debt that costs you the most.
Both methods require you to continue making the required payments on all your debts. The difference is simply where you put your extra repayment money.
So which debt strategy is better?
If we are talking purely about mathematics, the Debt Avalanche method is generally better.
Why?
Because prioritizing the highest interest debt usually minimizes the total interest you pay over time. But personal finances are not only mathematics. A repayment strategy is useful only if you can actually stick to it.
If the Avalanche method causes you to lose motivation and abandon your repayment plan, it may be less effective for you than the snowball method. In that situation, the snowball method may be the better choice.
In simple terms:
Choose Avalanche if;
- You are highly disciplined
- You want to minimise interest costs
- You are comfortable waiting longer for your first debt to disappear.
- Your highest interest debts are significantly more expensive than other debts.
Choose Snowball if;
- You need quick wins to stay motivated
- You feel overwhelmed by having many debts
- You want to simplify your finances quickly.
- You are more motivated by progress than by mathematical optimization.
What if you want the best of both?
You don’t necessarily have to follow one method rigidly. You can create a hybrid strategy. For example, you might have a very small debt that can be cleared immediately. You could pay it off first to create momentum, then switch to the Avalanche method and focus on the highest interest rate debt. This approach can give you the psychological benefit of a quick win while still allowing you to reduce expensive debt. However, be careful not to keep switching strategies every few weeks. The most important thing is to choose a system and stick with it.
A step-by-step guide to choosing your strategy
Step 1: List every debt you owe
Don’t leave anything out. Include bank loans, microfinance loans, credit card loans, mobile money loans, salary advances, overdrafts, retail shop loans, personal loans, money borrowed from friends and family. Write down the outstanding balance for each one.
Step 2: Find out the true cost of each debt
For each loan, find out outstanding balance, interest rate, required repayment, remaining repayment period, fees or penalties, and due dates. Don’t assume that the smallest monthly repayment means the debt is affordable. A small monthly payment over a long period can still result in significant total repayment.
Step 3: Stop adding new debt
A repayment strategy becomes much harder if you continue borrowing. Before aggressively repaying your existing debts, try to identify what is causing you to borrow. Is it, overspending, emergency expenses, poor cashflow management, business losses, lifestyle inflation, supporting too many people financially or irregular income? If the underlying problem is not addressed, you may pay off one debt only to replace it with another.
Step 4: Create a realistic debt repayment budget
Calculate your monthly income, then subtract your essential expenses. What remains is the amount available for debt repayment and other financial priorities. Don’t create an unrealistic repayment plan that leaves you unable to afford food, transport, rent, school fees, utilities or other necessities. A repayment plan needs to be aggressive enough to make progress but realistic enough to maintain.
Step 5: Choose Snowball or Avalanche
Now decide which approach suits you. If motivation is your biggest challenge, consider snowball. If interest costs are your biggest concern and you have the discipline to stay focused, consider Avalanche.
Step 6: Make minimum payments on every debt
This is extremely important. Don’t ignore your other debts just because you are focusing on one. Continue making the required payments on all accounts to avoid unnecessary penalties, additional charges or damage to your credit history. Then direct your extra repayment money toward your priority debt.
Step 7: Redirect every freed-up payment
When one debt is cleared, don’t treat the money as extra spending money. Redirect it toward your next debt. For example, suppose you were paying UGX 100,000 every month toward debt A. Once debt A is cleared, add that money to the amount you were already paying toward debt B. This is what creates the snowball or Avalanche effect.
What about emergency savings?
One mistake people sometimes make is putting every available shilling into debt repayment while keeping absolutely no emergency savings. That can be risky.
Imagine you use all your spare cash to clear a debt and then your car breaks down, you have an urgent medical expense, or your income is temporarily interrupted. Without any emergency fund, you might be forced to borrow again. The goal should therefore be to balance debt repayment with having at least a small emergency buffer. The right amount will depend on your circumstances.
Don’t forget your income
Cutting expenses can help you repay debt faster, but there is a limit to how much you can cut. You can only reduce your rent, food, transport and other essential costs so far. Increasing income can make a major difference.
Consider;
- Taking on freelance work
- Selling unused items
- Starting a small side business
- Offering a skill as a service
- Working overtime where possible
- Increasing sales if you run a business
- Monetizing an existing skill
The extra income should have a specific purpose. Instead of allowing additional income to disappear into lifestyle expenses, consider directing a significant portion toward your debt repayment goal.
A simple example
Let’s say Sarah has three debts:
- Loan A: UGX 500,000 at 12%
- Loan B: UGX 2,000,000 at 25%
- Loan C: UGX 5,000,000 at 8%
She has an additional UGX 300,000 per month available for debt repayment after making her required payments.
Using Snowball;
She would attack loan A – loan B – loan C. Her first goal would be to eliminate the UGX 500,000 debt. Once loan A is cleared, she redirects the payment toward loan B.
Using Avalanche;
She would attack loan B – loan C – loan A. She starts with the 25% debt because it is the most expensive. Both strategies can work, the difference is what Sarah is optimizing for.
Snowball optimizes for psychological momentum. Avalanche optimizes for interest savings.
The most important rule: Don’t compare yourself with other people.
Someone else’s debt repayment strategy may not work for you. Your income, expenses, interest rates, family responsibilities, financial goals and level of discipline are different. Some might tell you, “Avalanche is always the best”. Another person might say, “Snowball is the only way”. The truth is that there is no single strategy that works perfectly for everyone. The best payment strategy is the one that;
- Fits your financial situation
- Reduces your debt instantly
- Prevents you from taking on unnecessary new debt.
- Keeps you motivated
- Is realistic enough to maintain until you reach your goal.
Final verdict, Snowball or Avalanche?
If you are comfortable with numbers, disciplined, and focused on paying the least possible interest, the debt Avalanche method is usually the stronger choice. If you are overwhelmed by multiple debts and need quick victories to stay motivated, the debt Snowball method may be more effective for you.
And if you are somewhere in between, a hybrid approach can work. Ultimately, the best strategy is not the one that looks best on paper. It is the one you will eventually follow. Debt management is a journey, you did not get into debt overnight, and you may not get out of overnight either. What matters is having a clear plan, making consistent payments, avoiding unnecessary new borrowing, and celebrating every step forward. Whether you choose the Snowball or the Avalanche, the most important thing is to start and keep going.
A final question to ask yourself, “would I rather pay off the debt that feels easiest first, or the debt that costs me the most”. Your answer will tell you which strategy is best for you.
Contact Ntende Finance today to get started on a rewarding financial journey by getting credit that will serve you!
📞 Call or WhatsApp: +256 776 707960
☎️ Tel: +256 393 266139
📧 Email: info@ntende.com
📍 Location: Conrad Plaza, Plot 22 Entebbe Road, just after Nasser Road