Blizzard strategy

There is more than one order in which to pay off several loans at once. The avalanche method pays off the highest-interest loan first, which saves the most money. The snowball method pays off the smallest loan first, which builds motivation quickly but can leave an expensive loan running longer.

The blizzard strategy is a mix of the two. It starts with a snowball's quick win — clearing the smallest debt first — and then switches to an avalanche approach, going after the loan with the highest interest rate next, and so on.

The blizzard method works in two stages. Stage one: pay off the loan with the lowest outstanding amount, exactly as the snowball method would, to get an early sense of progress. Stage two: once that first loan is cleared, switch rules — from this point on, pay off whichever remaining loan carries the highest interest rate, as the avalanche method would.

The workbook frames this as solving a weakness in the snowball method on its own: snowball ignores interest rates completely, so a high-cost loan can sit unpaid for a long time if it happens to have a large balance. Blizzard clears the smallest loan for the motivational boost, then makes sure the costliest loan is dealt with next, rather than last.

An individual has four outstanding debts:

Blizzard order: pay off the credit card first (Rs 30,000, the smallest amount, as in snowball). Once cleared, switch to avalanche and pay off whichever remaining loan has the highest rate — the personal loan at 21% — next, followed by the car loan at 12%, and finally the housing loan at 8%.

The same debts under pure avalanche would have started with the personal loan, 21%, the highest rate among all four, rather than the smaller but lower-rate credit card; under pure snowball, the order would be identical to blizzard's, but snowball would carry on strictly by amount rather than switching to rate after the first loan.

Chapter 4, section 4.15.3 'Blizzard', follows directly after the avalanche (4.15.1) and snowball (4.15.2) sections, and reuses the same four-loan example — credit card, personal loan, car loan, housing loan — to show how each strategy orders the repayment differently. Expect a question that gives the same loan table and asks for the blizzard sequence, which will differ from both a pure avalanche and, after the first loan, a pure snowball sequence.

• Blizzard is not simply 'snowball first, then avalanche forever after the first loan' by amount — after the first (smallest) loan, every subsequent loan is chosen by highest rate remaining, not by amount.
• Do not confuse blizzard's two-stage switch with the avalanche strategy, which starts with the highest rate from the very first payment, or the snowball strategy, which never switches to rate-based ordering at all.
• The strategy needs both the outstanding amount and the interest rate of every loan to sequence correctly — missing either figure breaks the calculation.