When you have several debts, the order you pay them in matters. Two methods are widely used, and they come from different instincts: one is based on arithmetic, the other on motivation.
This article is general education, not personal financial advice.
The shared foundation
Both methods work the same way:
- Make the minimum payment on every debt, every month. Missing one has costs.
- Add up any extra you can afford each month.
- Send all of the extra to one target debt.
- When that debt is gone, add its payment to the extra and roll it to the next one.
The "rolling" is what makes both methods accelerate. The difference is only in which debt you target first.
The avalanche method
Target the debt with the highest interest rate first, whatever its size. When it is gone, move to the next highest rate.
Pros: it minimises the total interest you pay, and usually gets you debt-free soonest.
Cons: if the highest-rate debt is also large, the first win can take a long time, and that is where many people lose steam.
The snowball method
Target the debt with the smallest balance first, whatever its rate. When it is gone, move to the next smallest.
Pros: you close accounts quickly, and each one feels like progress. A 2012 study by Gal and McShane in the *Journal of Marketing Research* found that consumers who closed out individual debt accounts were more likely to eliminate their debt overall, which supports the motivational argument.
Cons: you usually pay somewhat more interest than with the avalanche.
A worked example
Suppose you have three debts and $200 a month extra:
| Debt | Balance | Rate | Minimum |
|---|---|---|---|
| Store card | $600 | 26.5% | $35 |
| Credit card | $4,200 | 22.9% | $110 |
| Car loan | $9,800 | 6.5% | $260 |
- Avalanche targets the store card first (26.5%), then the credit card, then the car loan.
- Snowball also targets the store card first, because it is the smallest, then the credit card, then the car loan.
In this case the two methods agree, which happens more often than people expect. They differ when a small balance carries a low rate, or when a large balance carries the highest rate. Try your own numbers in the free Debt Payoff Planner, which compares both, plus minimums-only, side by side.
How to choose
- Pick avalanche if the savings in interest motivates you, and your top-rate debt is not enormous.
- Pick snowball if you have struggled to stick with plans before, or you have several small balances you could clear in the next few months.
- Try a hybrid: clear one or two tiny debts for early momentum, then switch to highest-rate-first.
Do not spend weeks deciding. The difference between the methods is usually smaller than the difference between having a plan and not having one.
Other levers worth checking
- Call your lenders. Ask for a lower rate, or about hardship programmes if you are struggling.
- Balance transfer or consolidation can reduce interest, but check fees and the rate after any introductory period, and avoid running the old cards back up.
- Starter emergency buffer. Without a small cushion, a surprise bill goes back on the card. See emergency fund: how much is enough.
- Stop adding new debt while you pay it down.
Keep going
Debt payoff is a long game. Put the next milestone on your calendar, and check your progress monthly (our monthly money check-in is a good place to do it). If your payments are not covering even the interest, speak with a non-profit credit counselling service about options.
This article is general educational information, not financial, tax or legal advice.
General life-skills education, not medical, mental health, financial or legal advice. Adapt anything to your own circumstances. Disclaimer.