Getting out of debt faster saves thousands in interest. Two proven strategies — debt snowball (smallest balance first) and debt avalanche (highest interest rate first) — both work. The calculator below shows the numbers for both, so you can choose based on your psychology and your interest costs.
The avalanche method (highest rate first) saves the most total interest. The snowball method (smallest balance first) creates quick wins that help with motivation. NZ student loans are 0% interest — always pay them last. Extra payment of even $100–200/month above minimums can cut 2–5 years off a debt payoff timeline and save thousands in interest on high-rate debts.
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Your Debts (enter up to 4)
Snowball vs Avalanche: Which Should You Use?
| Method | Order | Benefit | Best for |
|---|---|---|---|
| Debt Avalanche | Highest interest rate first | Saves the most total interest | Those motivated by numbers and savings |
| Debt Snowball | Smallest balance first | Fastest “debt paid off” wins | Those who need psychological momentum |
Both work. Research (including NerdWallet and academic studies) shows the snowball method has higher completion rates for some people because the early wins build momentum.
Mathematically: For high-rate debts like credit cards (20–23% p.a.) vs lower-rate debts, the avalanche method saves meaningfully more.
NZ Interest Rates on Common Debts (2025)
| Debt type | Typical interest rate |
|---|---|
| Student loan (NZ resident) | 0% — pay last |
| Mortgage | 5.5–7.0% p.a. |
| Personal loan (bank) | 10.9–15.9% p.a. |
| Car loan (bank) | 10.9–14.9% p.a. |
| Car loan (finance company) | 13.5–22% p.a. |
| Credit card | 20.95–22.95% p.a. |
| Afterpay / BNPL (late) | ~20–25% p.a. effective |
| Payday loan / high-cost lender | 50–200%+ p.a. |
NZ Student Loans: Always Last
NZ student loans charge 0% interest for NZ residents (you must stay in NZ to maintain 0% status). This makes them the last debt to aggressively pay down.
- Minimum repayments (12 cents per dollar over repayment threshold ~$24,128) continue automatically via PAYE
- Never put extra money toward a 0% student loan when you have credit card debt at 20%+
- Overseas for 6+ months: interest starts accruing (currently 3% p.a.) — return to NZ or arrange repayments