Which debt to pay off first: avalanche or snowball?

The short answer: once your essential bills are covered, pay the minimum on every debt and put all the spare money towards the one with the highest interest rate. That’s called the avalanche method, and it always costs the least. The alternative, the snowball method, clears the smallest balance first. It costs a little more, but you get quicker wins. What matters far more than which one you choose is that you pay a fixed amount every month, and keep paying it when a debt is cleared.

An example with four debts

Take someone with £11,300 of debt spread over four accounts and £600 a month to put towards them. Card minimums here are the common “1% of the balance plus interest”, and the loan is a fixed £152 a month.

Three ways to pay it off

Look at the gap between the methods: avalanche beats snowball by about £88 here. The gap between either of them and paying only the minimums is about £11,968. So the first decision, a fixed monthly amount that doesn’t shrink as debts disappear, is worth many times more than the second.

Why the fixed amount is the trick

Each time a debt is cleared, its minimum payment is freed up. If you spend that money, the benefit disappears. If you keep paying the same total and aim the freed-up money at the next debt, the payoff speeds up. This rolling effect gives both methods their name: the “snowball” grows as it rolls.

The overdraft goes first with avalanche because 39.9% is the most expensive money in the list. With snowball the store card goes first, because it is the smallest, even though it is the cheapest of the three costly debts.

When avalanche isn’t the right call

• 0% deals. Pay only the minimum on a 0% card or balance transfer, but plan to clear it before the offer ends. When the 0% stops, the rate jumps to the standard one.
• Priority debts. Rent or mortgage, council tax, energy, court fines and tax come first. Missing these has much worse consequences than a credit card, so put them ahead of the interest rate maths.
• Early repayment charges. You can normally repay a loan early, and a charge only applies if you repay more than £8,000 within 12 months. Check your agreement before sending a large lump sum.
• If you won’t keep going. If clearing a small debt gets you motivated, choose snowball. The cost is small.

A simple plan

1. List every debt with its balance, APR and minimum payment.
2. Decide a total monthly amount you can keep up, not just this month.
3. Pay every minimum, then put the rest on the highest rate, or the smallest balance if you prefer snowball.
4. When a debt is cleared, add its payment to the next one, so the total stays the same.

For a single loan, the loan overpayment calculator shows what an extra payment saves. For cards, use the credit card calculator, and see how long £5,000 takes at different payments.

If you can’t cover even the minimums, StepChange, National Debtline and Citizens Advice give free, confidential help.

This is general information, not financial advice. The example uses simplified interest (APR divided by 12) and typical minimum payment rules. Check your own agreements.