Debt snowball vs avalanche
Debt snowball vs avalanche
Two methods for paying down debt faster
Having more than one debt is common. Knowing which one to pay down first is where most people get stuck.
There are two main approaches. They both work. The right one depends on what keeps you motivated.
The debt snowball
List your debts from smallest balance to largest, regardless of interest rate. Pay the minimums on everything, then throw every extra dollar at the smallest debt.
When the smallest is gone, roll what you were paying on it into the next one. Your payment on each successive debt gets bigger — the snowball grows as it rolls.
The snowball method wins on psychology. Clearing a debt completely, even a small one, gives you a concrete win early. That momentum matters more than the maths for a lot of people.
The debt avalanche
List your debts from highest interest rate to lowest. Pay minimums on everything, then direct every extra dollar at the highest-rate debt.
The avalanche method wins on maths. You pay less interest overall and clear your total debt faster — sometimes by months or years, depending on the amounts involved.
The catch is that the highest-interest debt isn't always the smallest. You might be grinding away at a $12,000 debt for a year before you see it disappear, which requires patience.
Which one should you use?
If you need early wins to stay motivated: snowball. If you're disciplined and want to minimise total interest paid: avalanche.
Both beat the alternative — paying minimums on everything indefinitely and letting interest do its work.
How to use it with SortMe
Use SortMe to see your current account balances and identify where debt is sitting. List your debts, pick your method, and set a fixed extra repayment as a recurring transfer each payday.
Even an extra $100 a fortnight directed at the right debt can cut years off your repayment timeline.
When to get advice
If you're carrying multiple debts across credit cards, a personal loan, and a mortgage, the order of attack gets more nuanced — especially when interest rates and tax implications differ. Naked Finance can work through the right sequencing with you.
These articles are financial education, not personalised financial advice. For advice specific to your situation, talk to a licensed financial adviser.