Debt Payoff Strategies: Snowball vs Avalanche
Two proven strategies for paying off debt
If you have multiple debts — credit cards, personal loans, car finance, BNPL balances — you need a plan for tackling them. The two most popular approaches are the snowball method and the avalanche method. Both work. The best one for you depends on your psychology and your numbers.
The snowball method
How it works
The snowball method focuses on paying off your smallest debt first, regardless of interest rate.
- List all your debts from smallest balance to largest
- Make minimum payments on everything except the smallest debt
- Put every spare pound towards the smallest debt
- When it is paid off, roll that payment into the next smallest debt
- Repeat until everything is cleared
Example
Say you have three debts:
| Debt | Balance | Rate | Min. Payment |
|---|---|---|---|
| Store card | £400 | 29.9% | £15/mo |
| Personal loan | £3,200 | 8.5% | £95/mo |
| Car finance | £7,500 | 6.2% | £180/mo |
With the snowball method, you attack the £400 store card first. Once cleared (in about 2-3 months with extra payments), you roll that £15+ extra into the personal loan payment, then roll everything into the car finance.
When to use snowball:
- You need quick wins to stay motivated
- Your debts have similar interest rates
- You have struggled to stick with debt repayment plans before
- The psychological boost of clearing a debt matters to you
The avalanche method
How it works
The avalanche method focuses on paying off your highest-interest debt first, saving you the most money in total interest.
- List all your debts from highest interest rate to lowest
- Make minimum payments on everything except the highest-rate debt
- Put every spare pound towards the highest-rate debt
- When it is paid off, roll that payment into the next highest-rate debt
- Repeat until everything is cleared
Example
Using the same debts:
| Debt | Balance | Rate | Min. Payment |
|---|---|---|---|
| Store card | £400 | 29.9% | £15/mo |
| Personal loan | £3,200 | 8.5% | £95/mo |
| Car finance | £7,500 | 6.2% | £180/mo |
With the avalanche method, you also start with the store card — but because it has the highest rate (29.9%), not because it has the smallest balance. If the personal loan were at 29.9% instead, you would tackle that first despite it being larger.
When to use avalanche:
- You are motivated by numbers and efficiency
- There is a big difference between your highest and lowest interest rates
- You can stay disciplined without quick wins
- You want to minimise the total amount you pay
Comparing the two methods
| Factor | Snowball | Avalanche |
|---|---|---|
| Targets | Smallest balance first | Highest rate first |
| Total interest paid | Slightly more | Least possible |
| Time to debt-free | Slightly longer | Slightly shorter |
| Motivation | Quick wins, visible progress | Knowing you are saving money |
| Best for | People who need momentum | People who like optimisation |
In practice, the difference in total interest is often surprisingly small — a few hundred pounds over the repayment period. The strategy you will actually stick to is the one that works best.
UK-specific debt considerations
Student loans
Plan 1, Plan 2, Plan 4, and Plan 5 student loans work differently from normal debt:
- Repayments are taken automatically from your salary above the threshold (currently £27,295 for Plan 2)
- Interest is tied to RPI inflation plus a margin
- Outstanding balances are written off after 25-40 years depending on your plan
- You should almost never prioritise paying off a student loan early — the money is better spent clearing high-interest debt or building savings
Student loans are not like normal debt. Do not include them in your snowball/avalanche priority list unless you are a very high earner who will definitely repay in full before the write-off date. For most people, overpaying a student loan is a poor use of money.
Mortgages
Mortgage debt is secured against your home and typically has the lowest interest rate of all your debts:
- Focus on unsecured debt first (credit cards, personal loans)
- Check your mortgage terms for overpayment limits (typically 10% per year without penalty)
- Remortgaging to a lower rate often saves more than overpayments
- Consider overpaying your mortgage only after clearing all high-interest debt and building an emergency fund
Credit card balance transfers
Before committing to a repayment strategy, check if you can transfer high-interest credit card balances to a 0% balance transfer card:
- Some cards offer 0% for 18-29 months
- There is usually a transfer fee (1-3%)
- You must make minimum payments to keep the 0% rate
- Set a reminder before the 0% period ends
Buy Now Pay Later (BNPL)
BNPL services like Klarna and Clearpay are increasingly common. Include these in your debt inventory:
- They typically have 0% interest if you pay on time
- Late payment fees can be significant
- Multiple BNPL balances add up quickly
- They now appear on credit reports
Using the JoinFunds debt tracker
Add all your debts
Go to Net Worth and click the Debts tab. Add each debt with its balance, interest rate (APR), and monthly payment amount. This gives JoinFunds the data it needs for payoff calculations.
Use the payoff calculator
For any debt with an interest rate and monthly payment, JoinFunds shows:
- Projected payoff date
- Total interest you will pay
- Months remaining
- How overpayments would accelerate your timeline
Record payments
Log each payment as you make it. Your balance updates automatically, and you can track your progress over time with the burndown chart.
Compare scenarios
Use the overpayment slider to see what happens if you pay £50, £100, or £200 extra per month. The side-by-side burndown chart shows exactly how much time and interest you would save.
Creating your debt payoff plan
- List every debt — balance, interest rate, minimum payment
- Choose your strategy — snowball for motivation, avalanche for efficiency
- Work out your monthly budget — how much can you afford to put towards debt beyond minimums?
- Set up your debts in JoinFunds — use the tracker to visualise your timeline
- Automate payments — set up standing orders for minimum payments on all debts
- Review monthly — check your progress in JoinFunds and adjust if needed
- Celebrate milestones — every debt cleared is a win worth acknowledging
This guide is for educational purposes and does not constitute financial advice. For personalised guidance, consider speaking with an independent financial adviser regulated by the FCA.
What's next?
- Net Worth, Debts & Assets — set up debt tracking in JoinFunds
- Building an Emergency Fund — your next priority after high-interest debt
- Setting Budgets — free up money for debt repayment
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