Paying off debt: snowball, avalanche and when to get help

Payday comes, and by the 2nd most of it has gone out again in debit orders for a store card, a credit card and a loan you took to cover the gap last year. You pay every month, yet the balances barely move. That feeling usually means you’re paying debt without a plan, and a plan is what makes it shrink.

If you’re still working out how people end up here, start with how small, easy credit becomes a monthly trap. This guide is about getting out.

First, see the whole picture

You can’t plan around a number you haven’t looked at. Make a list of every debt you have, with four things for each:

• Who you owe (the store, bank or lender).
• The balance: what you’d need to pay to settle it today.
• The minimum monthly payment.
• The interest rate: the yearly percentage the lender charges on what you still owe. It’s on your statement, or ask the lender.

Include buy now, pay later plans and money you owe family or friends. Then add up the minimum payments. That total is what your debt costs you every month before you spend anything else.

Pay the minimum on everything, then aim the extra

Every method that works follows the same rule. You keep paying the minimum on every debt, so nothing falls behind, and you put all your extra money on one debt at a time. When that one’s paid off, its old payment plus your extra rolls onto the next. Each debt you clear makes the next one go faster.

There are two common ways to choose the order.

	Snowball	Avalanche
Pay first	The smallest balance	The highest interest rate
Why it works	Quick wins keep you motivated	You pay the least interest overall
Downside	Can cost more in interest	The first win can take months
Ayesha's order	Pay in three, store card, credit card, loan	Loan, store card, credit card

With the snowball, Ayesha clears the R900 pay-in-three plan in the first month and the store card a few months later. With the avalanche, all her extra money goes to the 26% loan first. It saves her more over time, but she won’t see a debt disappear for a while.

Neither is wrong. If you’ve tried before and given up, the snowball’s early wins often matter more than the interest you’d save. If you’re steady and the rates are far apart, the avalanche costs less. The worst choice is spreading a little extra across everything, where none of it makes a real dent.

Make your plan in an evening

1. Write your list

   Every debt, with balance, minimum payment and interest rate. Check the balances in each app or on your latest statements.

2. Find your extra amount

   Go through your budget and pick a fixed amount you can add every month, even R300. Put it in your budget as its own line so it doesn’t get spent.

3. Choose snowball or avalanche

   Number your debts in the order you’ll pay them off.

4. Pay on payday

   Schedule the extra payment for the day your salary arrives, alongside the minimums.

5. Roll it over

   When a debt is paid off, ask the lender for a paid-up letter, close the account if you don’t need it, and move its payment to the next debt on your list.

Keep a small cushion while you do this. Even R1 000 set aside means a surprise cost doesn’t go back on a card and undo a month of progress.

Talk to your lenders early

If you can’t manage even the minimums, call the lender before you miss a payment. Ask whether they can lower the monthly amount for a while, stop or reduce interest, or agree a payment plan. Lenders often say yes to someone who calls first, and a missed payment hurts your credit record (the history lenders check before they lend to you).

Get any new arrangement in writing, by email or letter, and keep it.

Consolidation loans: one payment, but check the total

A debt consolidation loan is a new loan you use to pay off several smaller debts, so you have one payment instead of many. It can help if the new interest rate is lower than what you’re paying now.

It can also make things worse. A lower monthly payment often just means a longer loan, so you pay more in total. And once the store cards are cleared, they’re still open and easy to use again. If you consider one, compare the total you’ll repay on the new loan with what’s left on your current debts, and close the accounts it pays off.

When it’s too much: debt counselling

If your debts take so much of your pay that you can’t cover rent, food and transport, you may be over-indebted. In South Africa, the National Credit Act gives you a formal way out called debt counselling (also called debt review).

Here’s how it works:

1. You apply to a debt counsellor registered with the National Credit Regulator (NCR). They check your income, expenses and debts.
2. If you’re over-indebted, they work out one reduced monthly payment and negotiate lower payments, lower interest or longer terms with everyone you owe.
3. The plan is usually made official by a court or the National Consumer Tribunal. You pay one amount a month to a payment distribution agency, which pays each lender.
4. Your credit record is flagged while you’re under debt review, and you can’t take on new credit.
5. When the debts in the plan are paid, the debt counsellor issues a clearance certificate, and the flag must be removed from your record.

Debt counselling has fees, which the NCR sets guidelines for. Ask for every fee in writing before you sign anything. It’s a serious step that can take several years, so it’s meant for when a payoff plan and talking to lenders aren’t enough.

1. After the minimum payments, can you still pay for rent, food and transport?

   YesGo to the next question

   NoSpeak to a registered debt counsellor. Check they're registered on the NCR website first.

2. Can you find any extra money each month, even a few hundred rand?

   YesMake a snowball or avalanche plan and stick to it.

   NoCall your lenders and ask for a lower payment or a payment plan before you fall behind.

Try this today: open each of your banking and store apps and write down every debt you have: who you owe, the balance, the minimum payment and the interest rate. Add up the minimum payments. You can’t choose a payoff order until you have that list.