Debt snowball vs avalanche: which method clears debt faster?

List your debts from smallest balance to largest, ignoring interest rates. Pay the minimum on all of them and put every spare pound towards the smallest. When it is cleared, add what you were paying on it to the minimum on the next smallest, so your payment "snowballs" as each debt goes. Repeat until you are debt-free.

Example: £500 at 18% APR (minimum £25), £2,000 at 22% (minimum £60) and £5,000 at 15% (minimum £100), with £300 a month in total to spend on debt. The minimums take £185, so £115 extra goes to the £500 debt, which is cleared in month 4. Its £140 then goes to the £2,000 debt, cleared in month 15, and everything then goes to the £5,000 debt, cleared in month 31.

The appeal is psychological: clearing a whole debt in a few months feels like progress and leaves you with fewer bills to juggle. The weakness is that it ignores interest, so you can end up carrying expensive debt for longer.

List your debts from highest APR to lowest. Pay the minimum on all of them and put every spare pound towards the most expensive. When it is cleared, move to the next highest rate.

Using the same example, the extra £115 goes to the £2,000 debt at 22% first. It is cleared in month 13, then the £500 debt in month 15 and the £5,000 debt in month 31.

In this example the avalanche costs about £1,537 in interest and the snowball about £1,553, a difference of only about £16. That is because the rates are close together and the small debt is cleared quickly either way. The avalanche's weakness: if your most expensive debt is also your largest, you might go a year or more without clearing anything, which some people find demoralising.

The gap grows when rates are far apart and the smallest debt is also the cheapest. In the UK, credit cards and store cards often charge 20% to 40% APR while personal loans can be much cheaper, so the spread can be wide. These examples assume interest is charged monthly at the APR shown and the payment stays the same throughout; they are illustrations, not quotes.

Studies of people paying down debt have found that those who focus on clearing whole balances are more likely to keep going. Paying off a whole debt, even a small one, is proof that the effort is working, and each cleared debt is one less bill to manage. With the avalanche, months of payments without a single debt disappearing can sap motivation.

If the snowball costs you an extra £16 but keeps you on track, it is the better plan for you. If it costs an extra £200 and you are disciplined about numbers, the avalanche is worth the wait.

You do not have to pick one method purely. Common hybrids:

Choose the snowball if you have struggled to stick with a plan before, or your rates are close together so the extra cost is small. Choose the avalanche if you have one debt with a much higher rate than the others, or you are happy to wait longer for the first debt to disappear. Either way, give it at least three months before reassessing, because switching back and forth wastes the benefit of both.

Two things matter more than the method: paying more than the minimum every month, and not adding new debt.

Free, confidential help is available from StepChange, National Debtline and Citizens Advice. In England and Wales, a debt adviser can also apply for Breathing Space, which pauses most interest, charges and enforcement for 60 days.