Snowballing vs. Stacking: Which Should You Use to Get Out of Debt

 If you have debt, it’s time to tackle it. When it comes to methods of debt reduction, there are many options to consider. Everyone has debt, it’s how we reduce and manage it that sets us apart. But which should you use to get out of debt snowballing or stacking?

Some of the more popular debt reduction strategies include debt snowballing and stacking. But, which is better?

I’m going to tell you right away; monetarily speaking, stacking wins. But nothing is ever that simple. Both methods have their merits and their drawbacks. We’ll take a detailed look at each so you can decide what method will work best for you.

Forty million of us have student loan debt to the tune of $1.2 trillion dollars. Seven million of us are in default on those loans. Credit card debt isn’t much better. We have $712 billion in credit card debt outstanding, an average of $15,355 per household. Your debt is an emergency, but you can pay it off. There are two ways to do it.

Snowballing Method

Snowballing means listing all of your debts in order of smallest to highest dollar amount and then using any extra money to pay off the smallest balance while only paying the minimums on the others.

If you have a $5,000 student loan at 4% interest, a credit card balance of $6,000 with 17% interest, and a $10,000 car loan with 9% interest, you pay off the student loan first, followed by the credit card and finally the car.

Once the smallest debt is paid, you move to the next smallest using the same strategy and include the amount you were paying on the first debt into your monthly payment on the next.

You continue to do this until all of the debts are paid, the largest being last one to go.

Snowballing Pros

A big pro for this method is the psychological win it provides you. It’s so satisfying to cross a debt off your list. That boost can also give you momentum; you killed that one, you can kill all of these debts! This kind of boost is no small thing.

Snowballing also makes your life just a little bit easier. Each debt paid off is one less payment you have to remember to make, one less check to mail or electronic payment to schedule.

This method is also likely to be faster. Paying off the smallest debt first might mean you can get rid of it in just a couple of months.

Snowballing Cons

It’s a big one; it costs more money, in the end, using the snowballing method. Interest is powerful, and when it’s working against you, it’s working hard.

It also takes discipline to use this method. You free up money more quickly because you’re killing off those smaller debts faster than with the stacking method. What you’re supposed to do with that money is put it towards the next debt on the list.

But you didn’t get into debt because you have steel clad discipline. You might see those extra dollars in your checking account and think it’s more money to spend.

No! Bad! Put it towards the next debt.

Avalanche Method

To use the avalanche method, you list your debts in order of highest to lowest interest rate, regardless of the dollar amount of the debt. You throw as much money as you can at the debt with the highest rate of interest.

If you have the same debts we listed above, they would be ordered this way; the $6,000 credit card, the $10,000 car loan, and finally the $5,000 student loan.

Once each debt is paid, you move down to the next highest interest rate one, again,

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