1. Snowball attacks the smallest balance first
You make minimum required payments on all debts and direct extra money to the smallest balance. Clearing one account quickly can create psychological momentum.
Tip: Snowball optimises motivation and visible wins.
2. Avalanche attacks the highest interest rate first
Extra repayment goes to the most expensive debt while minimums continue elsewhere. This generally minimises interest cost if the repayment amount is the same.
Tip: Avalanche usually wins mathematically.
3. Behaviour can matter as much as the spreadsheet
A mathematically perfect plan that someone abandons is worse than a slightly costlier plan they consistently follow. The right method depends on discipline and debt structure.
Tip: Choose a method you can sustain.
4. Some debts need special priority
Secured debts risking a home or essential vehicle, overdue tax/legal obligations, or debt with severe immediate consequences may need priority even if they are not the highest-rate balance.
Note: Repayment order is not always only about interest rate.
5. Quick check
Which method generally minimises interest when all else is equal?
Answer: B - The avalanche directs extra money to the highest interest rate first.