The formula
pay every minimum, put the extra on one debt, then roll its payment into the next
Where it comes from
Both methods pay every minimum every month and throw all spare cash at one debt. When it clears, its payment is added to the spare cash and aimed at the next one — so the amount attacking the debt grows each time one falls, which is where the snowball name comes from.
How to work it out by hand
- List every debt with its balance, minimum payment and rate
- Order them: smallest balance first for snowball, highest rate first for avalanche
- Pay every minimum, plus all your spare cash on the first in the list
- When it clears, add its payment to the spare cash and move to the next
What is worth knowing
Avalanche is always cheaper in pure arithmetic, because it kills the most expensive interest first. Snowball is usually cheaper in practice, because clearing a whole debt early is the thing that keeps people going, and a plan abandoned in month four costs more than any interest rate. The gap between the two is usually smaller than people expect — here it is 283 out of 2,494, about 11% — so pick the one you will actually finish. Run both on your own debts and look at the real number before deciding on principle.