The Debt Snowball vs Avalanche Question, Settled with Numbers

There are two popular ways to attack multiple debts, and a long argument about which is better. Both work. They optimise for different things.

The two methods

Avalanche: pay minimums on everything, then throw every spare pound at the debt with the highest interest rate. When it clears, roll that payment into the next-highest rate. Mathematically optimal, because you always kill the most expensive money first.

Snowball: pay minimums on everything, then throw every spare pound at the smallest balance regardless of rate. When it clears, roll the payment into the next-smallest. Psychologically optimal, because accounts disappear quickly and momentum builds.

What the numbers say

Avalanche always costs less in total interest. How much less depends on how different the rates are.

• If your debts are 22%, 19% and 18%, the gap between the two methods is small, often a few tens of currency units. Use snowball; the motivation is worth more than the difference.
• If your debts are 29%, 12% and 4%, avalanche is meaningfully cheaper. Paying off a 4% student loan before a 29% card is an expensive way to feel good.
• The larger the spread between the highest and lowest rate, the more avalanche matters.

The hybrid most people should use

1. List every debt: balance, rate, minimum payment. Do it on paper or a spreadsheet. Seeing the total is unpleasant and necessary.
2. Clear anything under one month's spare payment immediately. One or two quick wins for momentum, regardless of rate.
3. Then switch to strict avalanche for everything remaining.
4. Never reduce the total payment as balances clear. The freed-up minimum rolls to the next debt. That rolling amount is the engine of the whole method.

Before you start either method

• Check for a lower-rate route. A balance transfer at 0% for 18 months, or a personal loan consolidating card debt at a lower rate, can beat any repayment ordering. Read the fee and the reversion rate.
• Call and ask for a rate reduction. It works more often than people expect, particularly with a long payment history.
• Keep a small cash buffer, even while repaying. Without one, the next unexpected bill goes straight back onto the card you just cleared.

Debt that should not be attacked early

Low-rate, long-term debt with tax advantages or income-linked repayment terms, such as some student loans and mortgages, often belongs at the back of the queue. Paying extra on 3% debt while holding 24% debt or while having no emergency fund is the most common ordering mistake in household finance.