How to Use the Debt Avalanche Method

Paying off debt isn't always straightforward, but there are strategies that can help. While the debt snowball method focuses on paying off smaller debts first, the debt avalanche method takes a different approach.

The debt avalanche method means paying off your debt with the highest interest rate first.

This approach helps you organize your payments while potentially saving money as you work toward becoming debt-free. But it does require patience and staying power.

How the Debt Avalanche Method works

1. List all your debts (except your mortgage) from highest interest rate to lowest

2. Add up all the minimum payments you must make each month

3. Create a budget to see how much extra money you can put toward your debt monthly

4. Apply that extra money to the debt with the highest interest rate

5. Once that debt is gone, add its minimum payment to your extra payment amount

6. Move on to the next highest-interest debt

7. Repeat until all debts are paid off

If a promotional interest rate ends, you might need to reorder your list to keep focusing on the highest-rate debt first.

Debt Avalanche Method Example

Imagine you have three debts:

• A $2,500 credit card balance with 22.9% interest

• A $5,000 credit card balance with 15.9% interest

• A $300 medical bill with 0% interest

Using the debt avalanche method, you'd focus on the $2,500 credit card first because it has the highest interest rate. If you can put an extra $200 toward debt each month (after making all minimum payments), that $200 would go toward this card.

Once you pay off that card, you'd add its minimum payment to your $200 and put the combined amount toward the $5,000 credit card.

The medical bill would be paid last, even though it's the smallest, because it has no interest.

Is the Debt Avalanche Method right for you?

The debt avalanche method requires patience, especially if your highest-interest debt has a large balance. But if you want to pay the least amount of interest overall, this strategy makes the most mathematical sense.

To stay motivated, try tracking your progress with a spreadsheet. This gives you the satisfaction of watching your debt decrease over time.

Remember that staying motivated matters. If the sacrifices become too much and you quit, you won't see the savings you're working toward. If tackling a larger debt first seems too overwhelming, the debt snowball method (paying off the smallest debts first) might work better for you.

Your path to financial freedom

The debt avalanche method isn't just about numbers—it's about creating a clear path to financial freedom. By prioritizing high interest debts, you're making a smart choice that could save you hundreds or even thousands of dollars in the long run.

Take control of your financial future today by choosing the debt payoff strategy that works best for you and your situation. Whether you choose the avalanche or another method, the most important step is to start.