Direct answer
Debt Snowball pays extra toward the smallest starting balance first. Debt Avalanche pays extra toward the highest annual interest rate first. Both continue minimum payments on every active debt and roll the payment capacity of cleared debts into the next target.
Avalanche is designed to reduce mathematical interest cost. Snowball is designed to create earlier small-balance wins. ToolBullet compares both using the same monthly budget so users can see the trade-off rather than receiving a one-size-fits-all instruction.
How the two orders differ
| Method | First target | Primary strength | Primary trade-off |
|---|---|---|---|
| Snowball | Lowest starting balance | Earlier account closures can feel motivating | Higher-rate balances may continue accruing |
| Avalanche | Highest annual rate | Usually minimises interest under fixed assumptions | The first visible payoff can take longer |
| Custom | User-selected row order | Models personal priorities | May cost more than the mathematical minimum |
The monthly calculation sequence
- Apply each debt’s annual rate divided by 12 to its opening balance.
- Apply the entered fixed minimum payment to every active debt, capped at the amount due.
- Add the user’s extra monthly amount to the target debt.
- If that target is cleared before the budget is exhausted, spill the remaining amount to the next target in the same month.
- Keep the original total monthly debt budget constant after debts close.
The order is fixed from the starting inputs for reproducibility. Snowball uses starting balance with higher rate as a tie-breaker. Avalanche uses rate with smaller balance as a tie-breaker.
Worked comparison
The ToolBullet regression example contains three debts:
| Debt | Starting balance | Annual rate | Minimum |
|---|---|---|---|
| Card A | 3,000 | 24% | 90 |
| Card B | 1,500 | 12% | 45 |
| Loan | 5,000 | 7% | 120 |
With 200 extra per month, both modelled strategies finish in 24 months. Snowball projects 1,206.10 interest and Avalanche projects 1,054.97, a difference of 151.13. Snowball closes Card B first; Avalanche targets Card A first.
Why the total monthly budget stays constant
The CFPB debt worksheet describes redirecting the entire payment from a cleared debt to the next account. ToolBullet therefore preserves the sum of starting minimum payments plus the entered extra amount. This prevents the plan from slowing down after each payoff.
In the final payoff month, some budget can remain unused because no balance is left. In all earlier months, used payments should reconcile to the available budget.
Important limitations
- Rates and minimum payments remain fixed.
- No new purchases, fees, penalty rates or promotional expiry.
- Minimum payments are entered amounts, not recalculated lender percentages.
- Debt labels and values stay local when saved.
- The model is not a substitute for contacting creditors or a qualified debt adviser when payments are unaffordable.