There are two well-established ways to clear multiple debts, and the honest answer about which is better depends less on arithmetic than on what keeps you going.

Avalanche: highest interest rate first

Pay the minimum on everything, then throw every spare dollar at the debt with the highest interest rate. When it clears, move to the next highest. Mathematically optimal. You pay the least total interest.

Snowball: smallest balance first

Pay the minimum on everything, then attack the smallest balance regardless of rate. When it clears, roll that payment into the next smallest. You pay slightly more interest, and you get a debt gone sooner, which for many people is what makes the difference between finishing and stalling.

A worked example

Say you have three debts and $400 a month spare:

  • Personal loan, $8,000 at 12%
  • Credit card, $3,500 at 21%
  • Buy now pay later, $900, no interest but with late fees

Avalanche says clear the credit card first. Snowball says clear the buy now pay later first. The total interest difference between the two approaches, over the life of the payoff, is usually in the hundreds of dollars rather than the thousands. That is a real difference and it is smaller than most people assume.

The honest recommendation

If the arithmetic motivates you, use avalanche. If you have started and stopped before, use snowball. The method you finish beats the method that is theoretically superior, every time.

Where the Australian specifics sit

Buy now pay later goes first, whatever method you choose. Not because of interest, but because lenders increasingly treat regular BNPL use as a signal about spending discipline, and it shows on your bank statements during assessment.

HECS or HELP sits last. It is indexed to inflation rather than charged interest, there is no benefit to your credit report from clearing it, and voluntary repayments cannot be refunded. It does reduce your borrowing capacity, because compulsory repayments come out of your assessable income, so there is a case for clearing a small remaining balance shortly before applying for a mortgage. For a large balance, that money almost always works harder in your deposit.

Talk to the free service before the paid one. If the debt is beyond what a strategy can fix, the National Debt Helpline on 1800 007 007 provides free, independent financial counselling. It is not a lender and it is not selling anything. Debt consolidation companies and credit repair firms charge for things a financial counsellor does at no cost.