How to Get Out of Debt: Snowball vs. Avalanche (With Examples)

To get out of debt, list everything you owe, make at least the minimum payment on every debt, and put every extra amount you can toward one debt at a time. The two most popular ways to choose which debt goes first are the avalanche method (highest interest rate first, which saves the most money) and the snowball method (smallest balance first, which gives quick wins).

Both work if you stick with them. The best plan is the one you will actually follow.

Quick answer

• List every debt with its balance, interest rate and minimum payment.
• Build a budget so you know how much extra you can pay each month.
• Always pay the minimum on every debt to avoid fees and credit damage.
• Avalanche: extra money goes to the highest interest rate first. Cheapest overall.
• Snowball: extra money goes to the smallest balance first. Fastest early wins.
• If you're falling behind, contact your lenders and a nonprofit credit counselor early.
• Avoid any "debt relief" company that charges fees before settling your debts.

This article is general information, not personal financial advice.

Step 1: List Everything You Owe

Gather your latest statements and write down each debt in a simple table:

1. Name of the debt (credit card, store card, personal loan, car loan and so on)
2. Current balance
3. Interest rate (APR)
4. Minimum monthly payment
5. Due date

Seeing the full picture can feel uncomfortable, but it's the foundation of every plan. Keep a calendar of due dates so nothing is paid late.

Step 2: Find Extra Money Each Month

Your payoff speed depends on how much you can pay above the minimums.

1. Track your income and spending for a month. Our guide on how to make a budget shows you how.
2. Cut or pause non-essential spending, such as unused subscriptions.
3. Look for ways to lower bills, like switching providers.
4. Consider extra income if realistic. See our guide to legitimate ways to make money online.
5. Stop adding new debt. Only use a credit card for purchases you can pay off in full.

Also keep a small emergency fund. Without one, the next surprise bill usually goes straight back on a card.

Step 3: Choose Snowball or Avalanche

Both methods follow the same rules: pay the minimum on everything, then send all extra money to one "target" debt. When the target is paid off, add its payment to the next target. The only difference is the order.

Worked example

Imagine you owe three debts and can put 500 per month in total toward them. The minimum payments add up to 300, so you have 200 extra each month.

Assuming interest is charged monthly (APR ÷ 12), the minimums stay the same, and no new debt is added, here is what happens:

In this example, the avalanche saves about 102 in interest. The snowball clears the first debt ten months sooner, which can be a big motivation boost. The gap gets larger when your high-rate debts are also your biggest balances.

These figures come from a month-by-month calculation and are for illustration only. Real results depend on how your lenders calculate interest and set minimum payments.

Step 4: Lower Your Interest Costs

Reducing your interest rate helps no matter which method you choose.

1. Call your card issuers. Ask for a lower rate or a payment plan you can manage. Get any agreement in writing.
2. Compare consolidation options carefully. A consolidation loan combines several debts into one payment. It only helps if the rate and fees are lower overall. Be very cautious with loans secured on your home, because missed payments could put your home at risk.
3. Read the fine print on balance transfers. Check fees and what the rate becomes after any introductory period.

Credit card rates are often far higher than what most savings or investments reliably earn, which is why paying off high-interest debt is usually a strong first move before investing.

Step 5: Get Help if You're Struggling

If you can't keep up with minimum payments, act early.

1. Contact your lenders before you fall behind. Many will agree to a lower payment plan if you ask early.
2. Talk to a nonprofit credit counselor. A good counselor reviews your whole budget before recommending anything. Ask about fees up front.
3. Ask about a debt management plan. The counselor negotiates with your lenders, and you make one monthly payment. These plans often take four years or more and may require you to stop using credit cards.
4. Understand debt settlement risks. Settlement companies ask you to stop paying lenders while you save a lump sum. This can damage your credit, lead to collection calls or lawsuits, and forgiven amounts may be taxable.
5. Treat bankruptcy or insolvency as a last resort. Rules vary by country and it has long-lasting effects, so get independent advice first.

In the UK, free debt advice is available through MoneyHelper. In the US, the FTC suggests nonprofit options such as credit unions, universities and Cooperative Extension offices.

Common Mistakes and Debt Relief Scams

• Only paying the minimums. It keeps you current but can stretch repayment out for years.
• Missing payments on non-target debts. Always pay every minimum.
• Clearing a card, then using it again. Close the gap in your budget first.
• Paying upfront fees for debt relief. In the US, debt settlement companies can't legally charge fees before they settle any of your debts. Upfront fees are a major red flag.
• Believing "guarantees." Be wary of promises to wipe out all your debt, stop all lawsuits, or of special "government" debt relief programs.
• Paying for "credit repair" that removes accurate information. No one can legally remove accurate negative information from your credit report. Learn what really works in our guide on how to improve your credit score.

Frequently Asked Questions

Is the snowball or avalanche method better?

The avalanche usually saves more money because it targets the most expensive debt first. The snowball often feels more motivating because you clear a debt quickly. If you're likely to give up without quick wins, the snowball can be the better choice in practice.

Should I save or pay off debt first?

Most people benefit from a small emergency fund first, then focusing on high-interest debt. Without savings, unexpected costs tend to end up back on credit cards.

Does a debt consolidation loan reduce what I owe?

No. It replaces several debts with one loan. It can save money if the new rate and fees are lower, but it doesn't reduce the amount you borrowed, and secured loans put your property at risk.

Will paying off debt improve my credit score?

Paying on time and lowering your credit card balances usually helps over time. Payment history matters a lot, so keep every account current while you work through your plan.

How long does it take to get out of debt?

It depends on your balances, interest rates and how much extra you can pay. Listing your debts and running a simple month-by-month plan, like the example above, gives you a realistic date to aim for.

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Sources

• CFPB – How to reduce your debt
• FTC – How to get out of debt
• Investor.gov (SEC) – Pay off credit cards or other high-interest debt