Avalanche
Usually lowest total interest because extra money goes to the highest APR first. Mathematically tidy, emotionally slower if the biggest balance is first.
Lowest interest is not always the only answer
Snowball
Usually pays more interest but clears small balances first, which can make the plan feel real and free up attention.
How the calculator works
Each month the calculator adds interest to every balance at the APR divided by 12, pays the minimum on each debt, then puts whatever is left of the monthly budget onto one target debt. Avalanche targets the highest APR first; snowball targets the smallest balance first. When a debt is cleared its minimum stays in the budget and rolls on to the next target. If the budget is lower than the minimums added together, the calculator runs on the minimums and shows a warning instead of a verdict. Runs stop at 600 months.
Worked example with the default figures
The defaults are a £450 monthly budget and four debts: Card A, £3,200 at 24.9% APR with an £85 minimum; Card B, £1,400 at 19.9% with £45; an overdraft of £900 at 39.9% with £40; and a loan of £2,600 at 9.9% with £130. The minimums total £300, so £150 a month is extra. In month one, interest adds £140.99 across the four balances.
Avalanche sends the extra to the overdraft, then Card A, then Card B. Snowball also starts with the overdraft, because it is the smallest balance as well as the most expensive, then moves to Card B, the loan and Card A. Both routes clear everything in 22 months, but avalanche costs £1,552.76 in interest and snowball £1,680.39, a difference of £127.63 (the result panel rounds to whole pounds). Drop the budget to £300 and both take 39 months, with interest of about £3,333 and £3,356. Raise it to £600 and both finish in 16 months.
Limits of the result
- APR divided by 12 is a simplification. Lenders may work out interest differently, for example on daily balances, so real totals will differ.
- Minimum payments stay fixed here. Credit card minimums usually fall as the balance falls, which makes a minimum-only plan slower than it looks.
- Fees, promotional rates, new spending and rate changes are not included.
- It is meant for non-priority debts. Arrears on rent, mortgage, council tax or energy come first whatever their interest rate, because the consequences of not paying are more serious.
- If the budget cannot cover the minimums, free debt advice comes before any optimisation. In England and Wales an adviser can check whether a 60-day Breathing Space would pause interest, charges and most enforcement while a plan is made.
Useful guidance
Frequently asked questions
The questions readers most commonly ask about this topic. Each answer is reviewed by the Editor against current HMRC, FCA and MoneyHelper guidance.
▸ How do the avalanche and snowball methods differ?
Both methods pay the minimum on every debt each month and put the rest of the monthly budget towards one debt at a time. Avalanche puts the extra money on the debt with the highest APR; snowball puts it on the smallest balance. Because the extra money goes where the interest rate is highest, avalanche usually costs less interest, while snowball reduces the number of separate debts sooner. With this calculator's default figures (a £450 monthly budget across four debts), both routes clear everything in 22 months: avalanche costs £1,552.76 in interest and snowball £1,680.39, a difference of £127.63. The difference depends on the balances, APRs, minimum payments and budget, so entering your own figures shows what it is in your case.
▸ When should I consider a debt consolidation loan?
Consolidation makes sense when you can secure a personal loan at a lower rate than your card APRs, AND you commit to not using the cards again. Typical scenario: combining £8,000 across 3 cards at 22-29% APR into a personal loan at 8-12% APR. Calculate total interest on each path. Risk: many people consolidate then run cards back up — track utilisation closely.
▸ What's the difference between an IVA, DRO and bankruptcy?
Debt Relief Order (DRO, England and Wales): for people who owe less than £50,000, have less than £75 a month spare income, assets worth less than £2,000 and no vehicle worth £4,000 or more — debts are written off after 12 months. IVA: a formal 5-year arrangement to pay creditors a percentage of debt — keeps you out of bankruptcy. Bankruptcy: a formal insolvency process (in England and Wales you apply online and an Insolvency Service adjudicator decides; a creditor can also petition the court) that usually frees you from most debts after 12 months, but with serious credit/asset implications. All three appear on your credit file for 6 years. Speak to free debt help (StepChange, National Debtline) before formal options.
▸ Can I negotiate with creditors directly?
Yes — especially with debt collection agencies (DCAs) who often buy old debts for pennies on the pound. Many will accept 30-50% as full settlement, but this DOES appear on your credit file as "partially settled" which lenders treat negatively. Always get any settlement agreement IN WRITING before paying — verbal offers don't bind the creditor. Free help: StepChange and Citizens Advice will negotiate on your behalf.
▸ What is the FCA persistent debt rule?
Since 2018, FCA rules require credit card issuers to flag customers who pay more in interest and charges than they repay in principal over 18 months. The issuer must contact you with options to repay faster, and after 36 months of persistent debt the issuer may need to take action — including reducing your credit limit or suspending the card. The rule protects consumers but doesn't automatically write off debt.
▸ Will paying off debt improve my mortgage application?
Yes significantly. Lenders look at your debt-to-income ratio and minimum monthly debt servicing costs when assessing affordability. Clearing or reducing credit card balances 3-6 months before applying improves both. Closing the cards immediately after isn't necessary — having low utilisation on open accounts can actually strengthen the application, provided the cards aren't maxed out.
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