The five ways you can clear debt explained including the snowball method

ANY debt adviser will tell you there is no one-size fits all way of getting back into the black. 

How much debt you can afford to repay and how frequently depends on your earnings and outgoings. 

It also hinges on your personality, whether you are a spender or saver and how easy you find it to stick to a plan. 

But adopting a tried-and-tested method for tackling money that you owe can help keep you motivated and on the right track. 

Here are some ways to clear your debts as quickly as possible. 

The snowball 

Most people owe money to several different companies, in the form of personal loans or credit cards, or through buy-now-pay-later. 

If you can’t clear them all at once, it is important that you always prioritise putting any spare cash towards keeping on top of your priority bills and debts first - this is known as the snowball method.

These include rent or mortgage, so you do not lose your home, council tax and heating bills.

Once those are paid, the snowball method suggests you focus your efforts on clearing your less intimidating debts first.  

“List all of your debts from smallest to largest, not including any mortgage,” says Rachel Rowley, a financial adviser and financial coach. 

“Then focus on paying off the smallest debt first, while making only minimum monthly payments on the others.”

This method is not the most cost effective, because interest on bigger debts accumulates, but it does keep you motivated. 

“The idea is that starting small means you’ll find it easier to keep it up and you see progress quicker,” Rowley explains. “It’s probably the most popular method as a result”.

The avalanche 

This will save you more money in interest than the snowball, but it can be less satisfying, so you need to dig deep to find the willpower to stick at it. 

“You allocate enough money to make the minimum payment to each debt, then you pay any remaining money to the debt with the highest interest rate,” explains Rowley. 

“Using this approach, once the debt with the highest interest rate is entirely paid off the extra repayment funds go toward the next highest interest-bearing loan. 

“You continue this until all the debt is paid off.”

The hybrid

You could, of course, mix in a bit of both.