Where several debts are held, the order of repayment affects both the total cost and the likelihood of completing the process. Two approaches are commonly described and they optimise for different things.
This describes the two methods and the research comparing them. It is not advice, and anybody in financial difficulty should be seeking free regulated debt advice, which is available in most jurisdictions.
The two methods
Both assume paying minimums on everything and directing any surplus to one target debt.
The avalanche method targets the highest interest rate first, then the next, and so on.
The snowball method targets the smallest balance first, regardless of rate.
Avalanche minimises total interest paid and is arithmetically optimal.
Snowball produces the first cleared debt sooner, which is where the behavioural argument sits.
The arithmetic case
Straightforward and not in dispute.
Interest accrues on balances at their respective rates, so directing surplus toward the highest rate reduces total interest more than any other allocation.
The size of the advantage depends on the spread between rates and the size of the balances.
Where rates are similar, the difference between methods is small. Where one debt carries a substantially higher rate, the difference is meaningful.
The behavioural research
Which is where the argument becomes interesting.
Studies examining actual repayment behaviour have found that people are more likely to persist with repayment when they experience early progress, and that closing accounts entirely produces a stronger motivational effect than reducing balances proportionally.
Research on this has found that focusing on discrete accounts and closing them is associated with better completion rates than spreading payments.
Which suggests that a method producing early completed debts may outperform an arithmetically superior method that nobody finishes.
How to choose between them
The question resolves to a comparison.
Calculate the interest difference between the two orderings, which is arithmetic and can be done with a spreadsheet or a calculator.
If the difference is small, the behavioural benefit of the snowball approach plausibly outweighs it.
If the difference is large — because one debt carries a very high rate — the case for the avalanche is stronger.
A hybrid is common in practice: clear one very small balance for the motivational effect, then switch to targeting the highest rate.
What matters more than either
Worth stating plainly.
The amount directed toward repayment dominates the ordering. Doubling the surplus payment affects the outcome far more than choosing between methods.
Stopping further borrowing is a prerequisite, since neither method works while balances are being added to.
And the interest rates themselves, which may be reducible through consolidation or balance transfer, which changes the arithmetic more than the ordering does.
Consolidation and transfers
Worth understanding since they interact with the ordering.
A balance transfer to a lower or zero rate reduces interest during a promotional period, generally for a fee, and reverts to a higher rate afterwards.
A consolidation loan replaces several debts with one, potentially at a lower rate and generally over a longer term.
The caution on both is that a longer term at a lower rate can produce a higher total cost, and that clearing revolving credit without closing the accounts frequently results in the balances rebuilding.
These are decisions where the terms matter substantially and where regulated advice is appropriate.
Priority debts
A category that overrides both methods.
Some debts carry consequences beyond cost — housing, essential utilities, court-ordered payments, tax obligations in some systems.
These are generally treated as priorities regardless of interest rate, because non-payment risks losing a home or an essential service.
Debt advice organisations classify debts on exactly this basis, and the classification differs from an interest-rate ordering.
Where to get help
Worth stating since the alternative is expensive.
Free debt advice is available from charities and statutory services in most jurisdictions, and it is genuinely free rather than a route to a paid product.
Commercial debt management services charge fees for arrangements that free services provide without them.
Anybody struggling rather than optimising should be starting with the free services, which is the single most useful thing in this whole area.
Communicating with lenders
Worth stating since it changes what is possible.
Lenders in many jurisdictions have obligations to treat customers in difficulty fairly, and contacting them before missing payments generally produces better outcomes than after.
Options that may be available include reduced payments for a period, interest suspension, and restructuring.
None of these is guaranteed and all of them are more readily available to somebody who makes contact early.
Free debt advice services can make this contact on somebody's behalf, which for people finding the conversation difficult removes a genuine barrier.
What not to do
Two responses that reliably make things worse.
Borrowing further to make payments, which increases the total and generally at a higher rate, since credit available to somebody already struggling is expensive.
And ignoring correspondence, which removes every option that would otherwise have been available and accelerates escalation.
Both are understandable responses to a stressful situation and both are specifically what free debt advice services exist to prevent, which is why contacting them early matters more than any repayment ordering.