Debt Avalanche Method
The debt avalanche method directs all extra payment capacity to the highest-interest-rate debt first, while making minimum payments on all others. When the highest-rate debt is paid off, the freed-up payment rolls to the next highest-rate debt. The avalanche method minimizes total interest paid and is the mathematically optimal payoff strategy.
Debt Snowball Method
The debt snowball method pays the smallest balance first, regardless of interest rate. When the smallest debt is eliminated, the freed-up payment rolls to the next smallest balance. The snowball method typically costs more in total interest but generates faster visible wins that many borrowers find motivating enough to sustain the plan.
When Consolidation Beats Both
Debt consolidation makes sense when you can qualify for a loan at an interest rate meaningfully lower than your current weighted average rate. If you have $25,000 in credit card debt at 22% APR and can consolidate to a personal loan at 10%, the interest savings can be substantial regardless of payoff method.
The Discipline Requirement
No payoff strategy works without spending discipline. The most common mistake is freeing up minimum payment capacity by paying off a card, then rebuilding that balance. A payoff plan is most effective when paired with a budget that prevents new debt accumulation during the payoff period.