If you're juggling more than one debt — a credit card, a car loan, an overdraft — and you have some spare money to put toward paying them off faster, there are two well-known strategies for deciding which one to target first: the avalanche method and the snowball method.
The avalanche method: highest interest rate first
With avalanche, you pay the minimum on every debt, then put every extra pound toward whichever debt has the highest interest rate, regardless of its size. Once that one's cleared, you roll the full amount you were paying onto the next-highest rate. Mathematically, this is the cheapest method overall, because it minimises the total interest you pay across all your debts.
The snowball method: smallest balance first
With snowball, you ignore interest rates and instead put your extra money toward whichever debt has the smallest balance, however low its interest rate. Once that one's gone, you roll the payment onto the next-smallest balance. It usually costs a little more in total interest than avalanche, but clearing a whole debt early tends to be motivating in a way that chipping away at a large balance for years isn't.
A simplified side-by-side example
| Debt | Balance | Interest rate |
|---|---|---|
| Credit card | £800 | 22% |
| Car loan | £4,500 | 8% |
Avalanche would put extra payments toward the credit card first, despite it being the smaller balance, because its rate is far higher. Snowball would also pick the credit card first here, since it happens to be the smaller balance too — in cases like this, where the smallest balance and the highest rate are the same debt, the two methods agree.
A hybrid approach
If you have several debts and the "right" answer isn't obvious, a common middle ground is to clear one genuinely small debt first for a quick, motivating win, then switch to avalanche for everything that's left. You get a bit of the psychological boost without giving up much of the interest saving.
One thing worth checking before you start
If you have good credit, it's worth comparing whether a 0% or low-rate balance transfer card, or a debt consolidation loan from an FCA-regulated lender, could reduce the interest you're paying across the board before you commit to a payoff order. Run the comparison through a regulated price comparison service rather than assuming the first offer you see is competitive.