How to pay off debt fast in the UK: snowball vs avalanche

In my early twenties I was in debt and living paycheck to paycheck. What changed things was not a clever trick. It was writing every debt down in one place, picking one to attack, and not stopping. This is that plan.

Step 1: list everything you owe

Open your banking apps and statements and write down every debt:

Include buy now pay later plans, catalogue accounts, money owed to family and anything in arrears. It is uncomfortable, but you cannot plan around a number you have not looked at.

Step 2: deal with priority debts first

Some debts have much worse consequences if you fall behind. Citizens Advice calls these priority debts:

• Rent or mortgage
• Council tax
• Gas and electricity
• Court fines
• Child maintenance
• TV licence
• Income tax and VAT owed to HMRC

Missing these can lead to eviction, disconnection or court action. Credit cards, loans and overdrafts are serious, but the consequences are slower. If you are behind on a priority debt, get free debt advice now.

Step 3: pick a method

Pay the minimum on everything, then choose where the extra goes.

The debt avalanche

Put every spare pound on the debt with the highest interest rate. When it is gone, move to the next highest. In the example above, that means the overdraft first, then the credit card, then the car finance.

Mathematically, this always costs the least interest.

The debt snowball

Put every spare pound on the debt with the smallest balance, whatever its rate. Clearing a whole debt quickly feels good, and that motivation keeps a lot of people going.

It usually costs a little more interest than the avalanche. Often the difference is small.

Which should you use?

The one you will stick to. If you are motivated by numbers, use the avalanche. If you have tried before and given up, try the snowball. The calculator below shows both side by side for your own debts.

Free toolDebt payoff calculatorSee when you will be debt free, and whether the snowball or avalanche method saves you more.→

Step 4: find extra money every month

The extra payment on top of your minimums is what makes either method work. Even £50 a month changes the debt-free date a lot.

• Cut subscriptions you rarely use. Check your bank statement for the last three months.
• Use a simple budget. The 50/30/20 rule is a good place to start.
• Earn on the side and send it straight to your target debt. Here are side hustles that fit around work.
• Sell things you do not use on Vinted or eBay.

Step 5: cut the interest you pay

• A 0% balance transfer card can pause interest on card debt for a year or more, if you can get one.
• Ask your bank whether it offers a cheaper arranged overdraft or a loan to replace it.
• A cheaper personal loan can replace several expensive debts. Only do this if you will not run the cards back up.

Step 6: keep a small safety net

Before you throw every penny at debt, build a small emergency fund of £500 to £1,000. Without it, the next broken boiler or car repair goes straight back on a card. Then grow it to a full emergency fund once the debt is gone.

Common questions

Should I pay off debt or save?

Both, in order. Keep a small emergency fund first, then pay off debts that charge more interest than your savings earn. That is almost always credit cards, overdrafts and store cards.

Does paying off debt improve my credit score?

Usually, yes. Lower balances compared with your credit limits, and a record of on-time payments, both help. Read how to improve your credit score.

Should I close credit cards once they are paid off?

Not straight away. An open card with a zero balance can help your score by lowering how much of your available credit you use. Close it if you know you will be tempted to use it.

What if I cannot afford my minimum payments?

Contact your lenders before you miss a payment, and talk to a free debt charity. They can help you set up a plan and may be able to freeze interest. See where to get free debt help.