Before You Start
- Ensure you have a clear list of all your debts — balances, interest rates, and minimum payments (in EUR).
- Have access to your online banking or loan platforms (e.g., ING, N26, Santander, Revolut).
- Basic familiarity with budgeting and tracking expenses.
Time needed: 1–2 hours for initial setup; monthly check-ins take 10–20 minutes.
What you'll need: Spreadsheet (Excel, Google Sheets, or Numbers), calculator, access to your loan statements or apps.
Paying off debt is a universal goal, but the best strategy can vary depending on your personality, financial situation, and the types of loans you have. If you’re a European juggling student loans, credit cards, or personal loans, you’ve likely heard of the “debt snowball” and “debt avalanche” methods. But which truly works best in Europe’s context? In this guide, we’ll break down both strategies with EUR-based examples, actionable steps, and help you choose the right path. For a broader look at holistic money management, see our Ultimate Guide to Mastering Money Management in Europe.
Step 1: List and Organise All Your Debts
What to do: Gather all your debts in one place. For each, record:
- Type (e.g., credit card, student loan, personal loan)
- Outstanding balance (€)
- Interest rate (APR, %)
- Minimum monthly payment (€)
Why it matters: You can’t choose the optimal payoff strategy without a clear debt overview. This step is the foundation of both methods.
What can go wrong: Missing a debt (like a forgotten store card or a BNPL account) can sabotage your plan. Double-check your bank and credit reports if needed.
Pro Tip
Use N26 Spaces or similar digital banking features to track each debt separately.
Step 2: Understand the Debt Snowball and Avalanche Methods
Debt Snowball: Pay off your smallest debt first (regardless of interest rate), while making minimum payments on others. After clearing the smallest, roll that payment into the next smallest, and repeat — like a snowball gaining size.
Debt Avalanche: Focus on paying off the debt with the highest interest rate first (regardless of balance), while paying minimums on the rest. After clearing the highest-rate debt, target the next highest, and so on.
Why it matters: The snowball method builds motivation through quick wins. The avalanche method saves the most money on interest over time. Your choice impacts both your wallet and your willpower.
What can go wrong: Picking a method that doesn’t match your personality can lead to giving up. If you’re highly motivated by visible progress, snowball might work better. If you’re analytical and patient, avalanche can be more efficient.
Step 3: Build Example Debt Lists (EUR-based)
Let’s use a realistic European scenario:
- Credit Card (ING): €800 balance, 19.9% APR, €30 min payment
- Student Loan (Dutch DUO): €3,000 balance, 2% APR, €50 min payment
- Personal Loan (Santander): €1,500 balance, 6.5% APR, €60 min payment
Both methods require you to pay at least the minimum on every debt, every month.
Pro Tip
Automate minimum payments using your bank’s standing order feature. See our guide to automating savings and payments for step-by-step instructions.
Step 4: Apply the Debt Snowball Method
What to do: Order your debts from smallest to largest balance:
- Credit Card (ING): €800
- Personal Loan (Santander): €1,500
- Student Loan (DUO): €3,000
Allocate any extra money (say, €200/month above minimums) to the smallest debt first. Pay minimums on the others.
Calculation example:
- Credit Card: €30 minimum + €200 extra = €230/month
- Personal Loan: €60 minimum
- Student Loan: €50 minimum
After roughly 4 months, the credit card is paid off. Next, roll that €230/month onto the personal loan, paying €230 + €60 = €290/month until it’s gone, then repeat for the student loan.
Why it matters: You see debts disappear faster, which is motivating. This psychological boost can help you stick with your plan.
What can go wrong: You may pay more in total interest compared to the avalanche method, especially if your smallest debts have low interest rates.
Step 5: Apply the Debt Avalanche Method
What to do: Order your debts from highest to lowest interest rate:
- Credit Card (19.9% APR): €800
- Personal Loan (6.5% APR): €1,500
- Student Loan (2% APR): €3,000
Allocate your extra payment (e.g., €200/month) to the highest interest debt first, minimums on the rest.
- Credit Card: €30 minimum + €200 extra = €230/month
- Personal Loan: €60 minimum
- Student Loan: €50 minimum
The first target is the credit card (same as snowball here since it’s also the smallest). Once that’s gone, avalanche targets the personal loan (6.5%) before the student loan (2%), regardless of balance.
Why it matters: You pay less interest overall, freeing up more money for savings or investing down the line.
What can go wrong: If your highest-interest debt is also your largest, progress can feel slow, which might be demotivating. Some people quit before reaching the finish line.
Pro Tip
Use a free debt repayment calculator like Raiffeisen Credit Calculator (in German) to simulate both methods and compare total interest paid.
Step 6: Choose the Best Method for Your Situation
Consider these factors:
- Interest rates: If your high-interest debts are large, avalanche saves more money.
- Psychology: If you need quick wins to stay motivated, snowball is better.
- Loan types: European student loans often have low rates; focus on higher-rate credit cards or consumer loans first.
- Platform tools: Some banks (e.g., Santander) let you make extra repayments easily online. Check your lender’s portal for “extra payment” or “Sondertilgung” options.
Expected outcome: You should now have a clear, personalised plan for attacking your debt — and know which method you’ll use, with numbers to back it up.
Step 7: Automate and Track Your Progress
What to do: Set up automatic payments for all minimums and your chosen “extra” repayment amount.
- In N26: Use Spaces and scheduled transfers.
- In Revolut: Go to Payments → Recurring → Add transfer for each debt.
- In Trade Republic: Not for loan payments, but great for automating savings once debt is gone.
Track your progress monthly in your spreadsheet. Celebrate each debt paid off, and reallocate freed-up money to the next target.
Why it matters: Automation prevents missed payments and keeps your plan on track, even if you’re busy or distracted.
What can go wrong: Forgetting to update your plan after a debt is paid off can leave money unallocated. Review your progress regularly.
Pro Tip
Once your highest-interest debt is paid off, consider redirecting that payment to build an emergency fund. See our step-by-step emergency fund guide for details.
Common Mistakes
- Ignoring interest rates: Paying off low-rate student loans before expensive credit cards wastes money.
- Missing debts: Overlooking small or old accounts can derail your plan.
- Not automating payments: Manual payments increase the risk of missed deadlines and late fees.
- Switching methods mid-way: Changing strategies can reduce motivation and slow progress. Choose one and commit for at least 6 months.
- Not adjusting after payoff: Failing to redirect payments after clearing a debt can lead to wasted opportunities for saving or investing.
Next Steps
- Review your debt plan every 1–3 months and adjust as balances change.
- Once debt-free, redirect your payment habit toward savings or investing — see our guides on starting to invest with just €50 or automating your savings.
- For a full overview of managing money in Europe, revisit our Ultimate Guide to Mastering Money Management in Europe.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Always do your own research and consider consulting a qualified financial advisor before making investment decisions.