Question 1

What is the debt avalanche method?

Accepted Answer

The avalanche method prioritises paying off the debt with the highest interest rate first, while making minimum payments on everything else. Once the highest-rate debt is cleared, you "avalanche" the freed-up money onto the next highest rate. This approach minimises the total interest you pay over time.

Question 2

What is the debt snowball method?

Accepted Answer

The snowball method prioritises the smallest balance debt first, regardless of interest rate. The idea is that paying off smaller debts quickly creates psychological wins and momentum that keep you motivated. You may pay slightly more interest overall, but many people find they're more likely to stick with the plan.

Question 3

Which method should I use?

Accepted Answer

If saving money is your top priority, the avalanche method is mathematically superior as it minimises interest costs. If staying motivated is your challenge, the snowball method may work better because early quick wins keep you on track. The best method is the one you will actually stick to.

Question 4

What counts as a minimum payment?

Accepted Answer

For credit cards, the minimum payment is usually 1-3% of the outstanding balance or a fixed minimum (e.g. £25), whichever is higher. For loans it is the fixed monthly instalment. Use the minimum payment shown on your most recent statement or credit agreement.

Question 5

How does the extra payment work?

Accepted Answer

The extra payment is the amount you can afford to pay above your total minimum payments each month. Under both methods, this extra amount is directed entirely at the priority debt (highest rate for avalanche, smallest balance for snowball). When that debt is cleared, its minimum payment is also rolled into the extra on the next debt.

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