Two popular ways to decide which debt to overpay first. One saves the most money, the other is easier to stick with. Here is how each works and how to pick.
If you only have one loan, paying it down faster is simple: send whatever you can spare on top of the required payment. The question gets harder when you carry several debts at once, say a credit card, a car loan and a student loan, and you have a fixed amount of extra money each month. You keep paying the minimum on everything, but where should the extra dollar go? The debt avalanche and the debt snowball are the two best-known answers, and they disagree.
Both methods start the same way. You list every debt, keep making the minimum payment on all of them so nothing falls into default, and then throw every spare dollar at one chosen target until it is gone. When that debt is cleared, you roll its old payment into the next target, which is the part that makes either method accelerate over time. The only thing they disagree on is the order in which you attack the debts.
The avalanche orders your debts by interest rate, highest first, and ignores the balances entirely. You point all your extra money at the highest-rate debt until it is paid off, then move to the next highest rate, and so on down the list. Because each extra dollar is sent to wherever it cancels the most interest, the avalanche is the method that costs you the least money and clears your total debt in the least time. Mathematically, nothing beats it.
Picture a $6,000 credit card at 22%, a $12,000 personal loan at 11%, and a $20,000 car loan at 7%. The avalanche says to clear the card first even though it is the smallest, because each dollar paid there saves 22 cents a year in interest, against 11 cents on the personal loan and 7 cents on the car. Only once the card is gone do you move to the personal loan, then the car. You can run each balance through the relevant calculator to see exactly how much interest the extra payment saves on each one.
The snowball ignores interest rates and orders your debts by balance, smallest first. You attack the smallest balance with all your extra money, clear it, then roll everything into the next smallest, and keep going. Because the smallest debt usually disappears quickly, you get an early, visible win, then another, and the sense of momentum is what the method is built around. It is a behavioural strategy first and a financial one second.
Using the same three debts, the snowball would clear the $6,000 card first only if it happened to be the smallest balance. If instead you had a $1,500 store card at 18%, the snowball would tell you to wipe that out first regardless of the higher-rate debts elsewhere, simply because crossing a whole account off the list is motivating. You pay a little more interest overall than the avalanche, but for some people the steady run of closed accounts is the difference between sticking with the plan and giving up.
If you are confident you will stay the course, choose the avalanche: it is the cheapest and fastest route by definition, and the gap can be hundreds or thousands of dollars on larger debts. If you have tried to pay down debt before and lost momentum, the snowball's quick wins may be worth a slightly higher interest cost, because the best payoff plan is the one you actually finish. In practice the two often produce a similar order anyway, since high-rate debts like credit cards tend to be smaller balances than mortgages or car loans.
You do not have to be a purist. Some people use a hybrid: clear one tiny balance first for the motivation, then switch to strict avalanche order for everything else. Whatever order you pick, the move that matters most is holding your total monthly payment steady as balances fall, rather than letting it drift down, so the freed-up money keeps rolling into the next debt. This calculator models one balance at a time, so run it once per debt to compare what an extra payment buys on each.