How to Use the Debt Avalanche Method

The debt avalanche method is a way to pay off debt by targeting the highest interest rate first, so you pay less interest overall and become debt free faster.

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Step-by-Step: How the Debt Avalanche Works

1. List all your debts

   • Include credit cards, lines of credit, personal loans, etc.

   • Write down the balance, minimum payment, and interest rate for each.

2. Order them by interest rate (highest to lowest)

   • Ignore the balance size for the order—focus on interest rate, not how big the debt looks.

3. Pay minimums on everything

   • Keep every account in good standing by paying at least the minimum on each one.

4. Throw all extra money at the highest-interest debt

   • Any extra you’ve freed up in your budget goes to the top interest rate debt only.

5. When one debt is paid off, roll that payment into the next one

   • Move that full payment amount to the next highest interest debt, and repeat until everything is gone.

Simple Example

Let’s say you have:

• Credit Card A: 22% interest, $2,000

• Credit Card B: 19% interest, $1,000

• Line of Credit: 10% interest, $3,000

With the avalanche method, you would:

1. Pay minimums on Card B and the line of credit.

2. Put all extra money onto Credit Card A (22% interest) until it’s paid off.

3. Then attack Credit Card B (19% interest) with that freed up payment.

4. Finally, focus everything on the line of credit (10% interest).

You save the most on interest by killing the most expensive debt first.