Debt Avalanche
A debt repayment strategy that targets the highest interest rate first while paying minimums on the rest, minimizing total interest paid.
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The debt avalanche is a debt repayment strategy where you pay minimums on every debt and direct any extra payment toward the debt with the highest interest rate, regardless of its balance. Once the highest-rate debt is gone, you move to the next-highest, and so on. The avalanche minimizes total interest paid and shortens the overall payoff timeline compared to the snowball method.
How it works
List every debt with balance, minimum payment, and interest rate. Sort by interest rate, highest to lowest. Pay all minimums to stay current and avoid penalties. Direct every available extra dollar at the highest-rate debt until it is paid off. When that debt is gone, redirect the full payment (its minimum plus the extra) to the next-highest rate. Because high-rate balances accrue interest fastest, killing them first removes the most expensive compounding from your finances and leaves the lower-rate debts to be cleaned up at lower carrying cost.
Why it matters
Interest rate, not balance, determines how much a debt costs you per dollar over time. A $4,000 balance at 22% generates more monthly interest than a $9,000 balance at 6%. The avalanche method is mathematically optimal: across any realistic mix of debts, it minimizes total interest paid and finishes faster. The trade-off is that the first debt to fall is often a larger one, so the visible progress comes later. That delay is why some people abandon avalanche even though the math favors it.
Example
Same four debts as a snowball example: medical $400 at 0%, store card $1,200 at 21%, credit card $3,500 at 18%, car loan $9,000 at 6%. Avalanche order: store card, credit card, car loan, medical (the 0% debt has no urgency). With $250 extra per month, the store card is gone in roughly four to five months, then the credit card several months later. Total interest paid is meaningfully lower than the snowball ordering, especially for households carrying high-rate revolving debt.
When to use it
- Your debts have a wide spread of interest rates
- You are mathematically motivated and stay focused without quick wins
- High-rate revolving debt (credit cards) is a meaningful share of the total
- You have already proven you can sustain a long payoff effort
- You want the shortest path to debt-free in dollars and months