Plan the month · · 7 min read
Debt snowball or avalanche: how to choose an order to repay debts
Several debts at once, and a little paid on each every month. Here is how to choose a repayment order, smallest first or costliest first, and watch it shrink.
Four lines on the bank statement. The bank loan, the instalment deal on the fridge, the overdraft that never moves, and the 2,000 ILS you have owed your brother since the wedding. Every month you pay something toward each of them, exactly as you did last month. Four payments a month, and not one debt is really getting smaller.
The story told about this is that people who stay in debt are not disciplined enough. The old fixes are familiar: spread a little more across all of them; or take one big loan to close the rest, and sometimes end up two years later at the same point, with one bigger debt.
There is a part of you that wants the cheapest route, on paper. It says: "close the expensive one first, the rest is just feelings". And there is another part that needs to see something finish, now, to believe this is possible at all. Spreading has a job too, and it is easy to see why it is hard to give up: as long as the debts are spread out, there is no single failure anyone can point to. Both needs are real, and the order you choose has to work for both.
Why spreading the payments never reaches a finish line
It did not fail because of you. Spreading payments does not fail for want of effort; it fails because it has no finish line. When every debt shrinks a little, none of them ends, and without an ending there is no sense that anything is moving.
In 2012 David Gal and Blakeley McShane published a study in the Journal of Marketing Research on borrowers in a debt-settlement programme. They found that closing whole debt accounts predicted getting out of debt better than the amount paid did. In other words, the small win of crossing one debt off the list is not just a feeling. It is what keeps people going.
At the same time, interest is real. According to Loan4me's loan comparison and the Moneyplan (חתול פיננסי) guide, an all-purpose loan is priced in 2026 between 5.5% and 16% a year, depending on the lender and the borrower. Overdraft interest is usually set as prime plus a margin, and your own rate is on your bank statement. According to the Bank of Israel, its policy rate is 3.25% and the prime rate 4.75% (September 2026); check the current figure on the Bank of Israel site. The arithmetic is right, and the need to see something finish is just as right.
How to pay off debt: two well-known orders
The avalanche: list the debts from the highest interest rate to the lowest. Pay the minimum on all of them, and every extra shekel goes to the most expensive. On paper this order pays the least interest. The price: the first debt sometimes closes late.
The snowball: list them from the smallest balance to the largest. The same minimum on all, and every extra shekel goes to the smallest. The first win comes fast. The price: sometimes more interest.
In both, when a debt closes its payment does not vanish. It moves in full to the next debt on the list, so the pace picks up over time.
| Debt (example) | Balance | Annual rate (example assumption) | Monthly payment |
|---|---|---|---|
| Owed to brother | 2,000 ILS | 0% | 200 ILS |
| Instalment deal | 3,600 ILS | 12% | 300 ILS |
| Overdraft | 6,000 ILS | 10% | No fixed payment, just don't go deeper |
| Bank loan | 30,000 ILS | 8% | 950 ILS |
Say that after the minimums there are 800 ILS a month for extra repayment. With the snowball, the debt to your brother gets 1,000 a month and closes within two months. With the avalanche, the instalment deal gets 1,100 a month and closes in about the fourth month, and total interest across all the debts comes out lower. The rates in the table are an illustrative assumption; yours are in your agreements and statements.
Snowball or avalanche
| Aspect | Snowball | Avalanche |
|---|---|---|
| First on the list | Smallest balance | Highest interest rate |
| When the first debt closes | Usually soon | Sometimes later |
| Total interest | Sometimes more | On paper, the least |
| What keeps you going | Early wins | Knowing every shekel works hardest |
Snowball
- First on the list
- Smallest balance
- When the first debt closes
- Usually soon
- Total interest
- Sometimes more
- What keeps you going
- Early wins
There is also a middle route that people describe: close one small debt first, quickly, to see that it can be done, and then switch to the avalanche. Which order to choose is your decision.
Which order will keep you going
A repayment order that needs no perfect month
The goal: one table, one order you chose, and a monthly look at what got shorter. No spreading a little across everything, no new loan to close the old ones, and no waiting for a perfect month to begin. You do not need to become different people, only to decide once where every extra shekel goes.
From one table to the first debt closed
Stage 1: one table. Every debt, including the one to your brother. For each: balance, interest rate, monthly payment, and any early-repayment fee. When it applies and how it is calculated is explained in the Bank of Israel's public information and by the lender.
Stage 2: choose an order. Mark in the table which debt comes first under each method, and choose one.
Stage 3: minimum on all, the rest on one. What people on either order describe: every debt keeps its regular payment, and every extra shekel goes to the debt at the top of the list. An extra payment on a loan is an early repayment, so they check the agreement for a fee first. The decision is yours.
In AlphaHome: there is no dedicated debt model in the product, so you use expenses. Each debt is a monthly recurring fixed expense with the balance written in its title, for example "Bank loan, balance 28,400 ILS", updated once a month. The dashboard's "Free to spend until the end of the month" counts fixed and recurring charges in full from day one, so it shows what the month has left after fixed charges; the extra repayment comes out of that, after the variable spending still to come.
Stage 4: a debt closes, its payment moves. On the day a debt closes, move its whole payment to the next debt on the list, before it dissolves into the month.
Stage 5: a monthly check. Once a month, update the balances and see what got shorter. A line deleted from the table is the moment all of this was built for.
Three moments when the order slips
An unexpected expense, and this month there is nothing extra for repayment. This is not the end of the plan; it is one month. Today: keep paying the minimums and take on no new debt. Next time: pick up the order the following month, at the same place on the list.
The first debt closed and the freed-up payment simply melted into the month's spending. Freed money looks like spare money, so this happens to almost everyone. Today: give the next debt the closed one's payment. Next time: do it on the day the debt closes.
Your partner wants a different order. Probably one of you puts the arithmetic first and the other the need to see something finish. Today: the middle route, one small debt and then costliest to cheapest. Next time: do the monthly check together, in front of the same table.
We know which debt closes next
If you keep spreading, every debt keeps shrinking slowly, together, and the end keeps feeling far away. Once there is one table and one order, every month brings one line closer to its end.
What protects the order: a table everyone at home can see, a fixed day for the check, and no new loan decided under pressure. If the overdraft is the debt that weighs on you most, read about getting out of overdraft without a loan. To see what each debt really costs, there is the true cost of an all-purpose loan. And for which debts are worth taking at all, good debt and bad debt. This is general information, not personal advice.
This week: write every debt in one table, balance, interest rate and monthly payment, and mark which debt would come first under each of the two methods.
Do one thing this week
Open AlphaHome, record this month's income and fixed charges, and see how much is really free to spend. Everything in this article starts from that number.