Debt snowball vs avalanche: which method wins for Filipinos? Compare payoff strategies, calculate savings on high-interest cards/loans, and build habits for PDIC-protected growth.
Snowball vs Avalanche: Best Debt Strategies for Filipinos
Debts come in many forms — credit cards, university loans, money for medical expenses, or a new smartphone — and all of them need to be paid off as soon as possible to keep debt from spiraling.
Fortunately, there are proven payoff strategies to help you tackle multiple debts at once. We’ll focus on two of them: avalanche and snowball.
The golden rule before choosing a method
Always make minimum payments on all your debts. This keeps your credit score intact and prevents penalties. After covering minimums, put extra money toward one specific debt using either the avalanche or snowball approach.
Avalanche method: target high-interest debts first
The avalanche payoff method prioritizes high-interest debts. You allocate extra payments to the debt with the highest interest rate while maintaining minimums on everything else.
For example, a guy named Kyle has three debts:
- ₱30,000 car repair loan at 5.47%
- ₱400,000 home loan at 7.5%
- ₱80,000 student loan at 2.4%
With ₱15,000 extra each month after minimums, avalanche tells him to target the home loan first, then the car repair loan, and lastly the student loan. This is the most cost-efficient route, but it can be psychologically exhausting — paying the largest, highest-interest loan first means it will take many months before this burden is lifted from Kyle’s shoulders.
Snowball method: quick wins for more motivation
The snowball method prioritizes the smallest balance first, regardless of interest rate. You pay off the smallest debt, then roll that payment into the next smallest.
Using the same ₱15,000, Kyle would target the car repair loan first, then the student loan, and finally the home loan. He eliminates the car loan in 2 months and the student loan by month 8 — two debts gone quickly. These quick wins create psychological momentum that keeps people committed to debt payoff. However, the highest-rate home loan would keep accruing interest, which, for Kyle, means paying more.
Which method is right for you?
If you can stay disciplined and want to save the most money, choose the avalanche. If you need psychological wins to keep going or if you feel overwhelmed by multiple debts, choose the snowball approach.
Tips to accelerate your debt payoff
- List all your debts by size or interest rate before starting.
- Freeze your credit cards once you start paying them down to avoid adding new debt.
- When you finish paying off one debt, redirect that full payment to the next target.
- Track your progress in a spreadsheet or budgeting app and celebrate each milestone.
- Once you’re debt-free, deposit money into high-yield time deposits earning up to 8% with PDIC insurance to build wealth instead of paying interest.
Pick the strategy that matches your personality and financial style — either way, becoming debt-free funds your future growth. Start calculating your debts today and choose your path forward.
