If you have more than one debt, the order you pay them off in changes both how much interest you pay and how likely you are to stick with the plan. There are two well-known approaches, and the "better" one depends less on the math and more on which mistake you're more prone to.
The avalanche method
List every debt by interest rate, highest to lowest. Pay the minimum on everything except the highest-rate debt, and put every extra dollar there until it's gone. Then move to the next-highest rate, and repeat.
This is the mathematically optimal order — it minimizes total interest paid over the life of every debt, every time, without exception.
The snowball method
List every debt by balance, smallest to largest, ignoring interest rate entirely. Pay the minimum on everything except the smallest balance, and put every extra dollar there. Once it's paid off, roll that payment into the next-smallest balance.
This method usually costs more in total interest than the avalanche method. What it optimizes for instead is momentum: an early payoff, often within the first month or two, that gives you visible proof the plan is working.
Debt payoff plans fail more often from abandonment than from bad math. If a small early win is the difference between sticking with a plan for a year and quitting in month three, the interest saved by the mathematically better method never materializes anyway.
A quick way to decide
| If this describes you… | …this method likely fits better |
|---|---|
| You've stuck with financial plans before without needing early wins | Avalanche — saves the most in interest |
| You've abandoned plans in the past when progress felt slow | Snowball — front-loads a visible win |
| Your interest rates are all fairly close together | Either — the gap in interest saved is small, so pick by balance instead |
| One debt has a dramatically higher rate than the rest | Avalanche — the interest gap is too large to ignore |
A third option: hybrid order
Some people rank debts by interest rate but manually move any very small balance to the front of the line, even if its rate isn't the highest. This isn't a named method in most personal-finance writing, but it's a reasonable compromise: you get one quick early win without abandoning rate-based logic for every debt after it.
The bottom line
Avalanche saves more money. Snowball is more likely to be finished. Neither is wrong — the right one is whichever you can actually follow through on for the number of months your full payoff will take. Be honest with yourself about which one that is before you commit to a spreadsheet.
The best debt payoff method is the one you're still following in month six.