The two main debt repayment methods

If you have multiple debts — credit cards, personal loans, overdrafts — you face a choice about which to pay off first. Two strategies dominate personal finance advice: the debt snowball and the debt avalanche.

Both methods require you to make minimum payments on all debts and put any extra money towards one debt at a time. They differ only in which debt you target first.

The debt avalanche

With the avalanche method, you target the debt with the highest interest rate first. This minimises the total interest you pay over the life of your debts — mathematically, it is the most efficient approach.

Example: if you have a credit card at 39.9% APR, a personal loan at 12% and a car finance agreement at 8%, you would focus all extra payments on the credit card first, then the personal loan, then the car finance.

The debt snowball

With the snowball method, you target the smallest balance first, regardless of interest rate. When that debt is paid off, you roll the full payment into the next smallest debt.

The snowball typically costs more in interest than the avalanche. But it produces faster visible wins — debts disappearing from your list entirely — which many people find motivating enough to stick with the plan.

Which to choose

Research on debt repayment behaviour shows that many people abandon plans when early progress feels too slow. If you think motivation might be a challenge, the snowball method's quick wins may serve you better, even at a slightly higher overall cost.

If your debts have similar balances or if your highest-rate debt is also a small balance, the two methods may produce very similar results anyway.