Household debt is an everyday reality for many in South Australia. We see many Australians juggling with debt, such as credit cards, personal loans, and buy now pay later (BNPL) accounts. In 2025, the average Australian had $14,704 of personal debt, $3,193 of credit card debt, and $633. The average household debt was around $313,633.
This mix of debt can make it difficult to see progress, even when you feel like you’re paying on time. If you want debt relief, random or scattered repayments will most likely hold you back. You must choose a structured method for reducing debt.
There are two popular ways, including the debt snowball method and the debt avalanche method. Each method works in a different way, but both can empower you to take control and reach your goals.
This article explains how to reduce debt using these methods, compares their strengths, and gives you the tools to choose what meets your South Australian lifestyle best.
Why Do You Need a Debt Repayment Strategy?
For those of us with more than one loan or credit card, deciding how to reduce debt can be confusing. Many people end up paying the minimum for each debt, but this approach drags out your repayments and supercharges the amount you pay in interest. If you want to get out of debt faster, you need a plan that helps you make systematic payments.
That’s how a debt snowball or similar method helps you set a target to hit each month. You know what to pay and in what order. This takes out the guesswork and helps you see progress. Most people feel more motivated when they see debts disappearing one at a time.
Tracking that progress with apps or simple tools can keep you going, especially when motivation goes down. In our experience at Returnify, people who choose a specific repayment strategy are more likely to pay off everything instead of drifting back into debt.
What Is the Debt Snowball Method?
The debt snowball method is one of the most popular strategies in Australia to reduce debt. It works by building momentum and motivation from the first step.
Here is how the debt snowball works:
- List your debts from the smallest balance to the largest balance.
- Pay the minimum repayment on every debt.
- Put any extra money toward the smallest debt.
- Move to the next smallest debt after you clear the first one.
- Repeat the process until you clear every debt.
Let’s say you have a $700 credit card, a $2,000 personal loan, and a $9,000 car loan. With the debt snowball method, you pay minimums on the car and personal loan, but throw all extra cash at the $700 credit card.
When that’s gone, focus on the $2,000 personal loan, and then the car loan lasts. Each time you pay off a debt, you get a fast psychological win and build discipline for the next step.
What Is the Debt Avalanche Method?
The debt avalanche method takes a more numbers-driven approach to reduce debt. Instead of starting with the smallest balance, you focus on the debt with the highest interest rate first. The goal here is to wipe out the most expensive debt as early as possible, reducing the total interest you pay overall.
Here is how the debt avalanche method works:
- List your debts from the highest interest rate to the lowest interest rate.
- Pay the minimum repayment on every debt.
- Throw any extra money toward the highest-interest debt.
- Go to the next highest-interest debt after you clear the first one.
- Repeat until you clear every debt.
For example, if you have a credit card charging 20%, a BNPL account at 18%, and a personal loan at 7%, the debt avalanche method pushes you to pay off the credit card first, then the BNPL, and save the lowest-rate debt for last. This method works best if you are focused on pure cost savings rather than quick wins.
Debt Snowball vs Debt Avalanche: Key Differences
You might wonder why you should choose one strategy over the other. Both have the same target but offer distinct paths. Paying off debt is all about practical results that fit your lifestyle, so comparing both methods side by side can help you make sense of what’s better for your situation.
| Factor | Debt Snowball | Debt Avalanche |
|---|---|---|
| Priority | Smallest balance first | Highest interest rate first |
| Motivation | Quick wins | Slower early progress |
| Total interest paid | Usually higher | Usually lower |
| Psychological boost | High | Moderate |
| Mathematical speed | Moderate | High |
With the debt snowball method, motivation is the big win. You may pay more interest in the long run, but the rapid progress builds behavioural discipline. If you find getting started is the hardest part, this method is your best bet to pay back the debt. It’s also flexible and can be used even if your budget changes month to month.
The debt avalanche method can feel slower at first, as larger, high-interest debts take longer to clear. Yet, you save more in the end because you knock down the interest faster. This suits those who like to stick to plans by the numbers, like first-time homebuyers or anyone with high-rate debts soaking up extra cash each month.
Behaviour and consistency are more important than picking the “perfect” method on paper. If seeing quick results helps you stick with your plan, then the debt snowball method might be right for you. If you like squeezing every possible dollar out of your repayment plan, the debt avalanche method could save you more in the long run.
Which Method Helps Australians Reduce Debt Faster?
There is no universal answer for how to reduce debt the fastest. The right strategy depends on your financial personality and personal situation. When it comes to repaying debt, most Australians face emotional barriers, such as anxiety and stress (51%), feeling shame or embarrassment (40%) and feeling a sense of failure (40%).
If emotional motivation is the big barrier stopping you from making progress, the debt snowball gives you that needed momentum. On the other hand, if saving money and reducing interest is your focus, especially if you have high-rate debts, then the debt avalanche method will most likely get you out faster. Those juggling five or more high-interest loans could save thousands with this method.
Additionally, think about points like, do you have a steady income? Are your debts similar in size? Do you have one huge loan dragging you back? In other words, choose a strategy you can stick with, rather than switching back and forth or losing momentum.
One more factor you should consider is to stay consistent. Whether you choose debt snowball, avalanche, or a mix, be consistent with your repayments to keep the plan working. Adjust your method if your finances change, but stick long enough to see measurable progress.
How To Reduce Debt Successfully Using Either Debt Strategy
Whether you choose the debt snowball or the debt avalanche method, to reduce debt reliably, turn it into a routine. Here’s how you can do that:
- To run your repayment plan like a pro, learn a few key financial phrases. You need to know the right words to manage your system effectively.
- Start with a monthly budget so you know exactly what funds you have after living expenses.
- Close any gaps by tracking every dollar.
- Do not add new debt while you’re focused on repayment, as this will undo your gains.
- Automate repayments if possible. Most banks allow you to set up direct debits, reducing the risk of forgotten payments or late fees.
- Update your progress with a spreadsheet or digital tool like Returnify.
- Each time you pay off a debt, redirect that amount towards the next account, so your momentum grows.
No matter if you’re using the debt snowball method or the debt avalanche method, tracking and consistency remain your secret weapon. Celebrate the small wins, review your plan monthly and ask for support or resources if you need it.
Choose the Method You Can Follow
Building a repayment strategy is as much about psychology as it is math. The main difference between the debt snowball and debt avalanche methods comes down to motivation and interest savings. Each method can help you take back control of your finances, but you must stick to the plan you choose.
If structured repayment helps you feel less overwhelmed and more in control, either method can simplify how to reduce debt and improve your long-term well-being. Stay focused, find a strategy that fits your mindset, and review your progress regularly using a digital tool.
That’s where Returnify comes in. It helps you take control of your mortgage and pay it off 7 to 10 years faster, along with managing other debts such as credit cards, BNPL, personal loans, car loans, and money you owe to family and friends. Start using the app now. Call 1300 810 798 or email contact@returnify.au if you have any doubts.
Frequently Asked Questions
Disclaimer: This article is for general educational purposes only and does not constitute financial advice. Individuals should consider their personal circumstances or consult a qualified financial professional before making financial decisions.