Two methods dominate personal finance debt payoff advice: the avalanche and the snowball. Both work — but for different reasons and different people.
The Avalanche Method (Mathematically Optimal) Pay minimums on all debts, then put every extra dollar toward the highest-interest debt first. Once paid off, redirect that payment to the next highest-rate debt.
Example: $20,000 total debt (Credit card at 24%, auto loan at 7%, student loan at 5%). With $500 extra monthly, the avalanche pays off all debts 6 months faster and saves $4,200 in interest compared to snowball.
The Snowball Method (Psychologically Effective) Pay minimums on all debts, then attack the smallest balance first regardless of interest rate. Each payoff creates momentum — dopamine hits that keep you motivated.
Research from Harvard Business Review found that the snowball method leads to higher debt elimination completion rates because motivation matters more than math for most people.
Which Should You Choose? - Choose avalanche if: you're motivated by data, have high discipline, or your highest-interest debt is also your smallest balance - Choose snowball if: you've struggled to stick with budgets, need quick wins, or feel overwhelmed
The Hybrid Approach Pay off the one or two smallest debts first for motivation, then switch to avalanche. This gets you a quick win without sacrificing too much in interest.