Two ways to pay off several debts, and how to choose
Debt snowball or avalanche: which should I use?
How the avalanche works
Pay the minimum on every debt, and put everything extra on the one with the highest interest rate. When it is gone, move that payment to the next highest rate. It reduces the interest you pay overall.
How the snowball works
Pay the minimum on every debt, and put everything extra on the smallest balance. When it is cleared, roll that payment into the next smallest. The early wins come quickly, and for many people that momentum matters most.
When the difference is large
If one debt has a much higher rate than the rest, like a credit card next to a car loan, the avalanche can save a meaningful amount. If the rates are similar, the difference is small and the snowball’s motivation may be worth more.
What matters more than the method
Finding money each month to put toward the debt, and not adding to it while you pay it down. Either method fails if the balances keep growing.
Questions people ask next
Which method does Dave Ramsey recommend?
The debt snowball, as part of his Baby Steps. He argues the quick wins help people stay with it, which is a fair point for many people.
Can I combine them?
Yes. Some people clear one small balance first for a quick win, then switch to highest rate first. What matters is having a clear order and sticking to it.
Should I include my mortgage?
Usually not. Mortgages tend to have lower rates and longer terms, so most people focus on consumer debts like cards and loans first.
Run it against your own numbers
Everything above is the shape of the decision. What it cannot do is use your figures. You narrow four ways out to the one that fits you, then turn it into three moves in the order they work: free, and yours to keep.
Show me which wayFree. No card, and no account to begin.
This is general information about how these decisions work, not financial, legal or tax advice. Check the numbers against your own situation before you act.