Personal Finance · Explainer
Avalanche or snowball: how to sequence debt repayment
One method minimises interest. The other maximises the odds you keep going. The gap between them is smaller than the argument suggests.
The short answer
- Avalanche targets the highest rate first and costs the least in interest.
- Snowball clears the smallest balance first and produces visible wins sooner.
- Either beats paying minimums; the sequencing choice is second-order.
Both methods start identically: pay the contractual minimum on every debt, then direct all remaining capacity at exactly one of them. The only question is which one receives it.
Avalanche: highest interest rate first
Ordering by rate — not balance — minimises total interest paid and, mechanically, shortens the payoff. It is the arithmetically correct answer, and when one debt carries a far higher rate than the rest, the advantage is real rather than theoretical.
Snowball: smallest balance first
Ordering by balance clears individual accounts faster, which removes minimum payments from the monthly obligation and creates measurable progress. Repayment plans fail from abandonment more often than from arithmetic, and a method that is followed beats a better method that is not.
The prior step most plans skip
Consolidation, hardship programmes and forbearance change the terms rather than the sequencing, and can beat both methods outright. Lenders will usually discuss options before an account is in arrears — and are far less flexible afterwards.
Sources
- Dealing with debt — CFPB
- Debt advice — MoneyHelper (UK)
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