The Debt Avalanche Method: A Complete Guide

If saving the most money possible is what motivates you, the debt avalanche method is your best friend. It’s the mathematically optimal way to pay off multiple debts — and it can save you hundreds or even thousands in interest.

What Is the Debt Avalanche Method?

The debt avalanche is a payoff strategy where you focus on your highest interest rate first, regardless of balance size. You make minimum payments on all your debts, then put every extra dollar toward the debt charging you the most interest.

Once that high-rate debt is gone, you redirect the payment to the next highest rate. Over time, this approach minimizes the total interest you pay across all your debts.

How It Works: Step by Step

1. List all your debts from highest interest rate to lowest
2. Make minimum payments on every debt
3. Put all extra money toward the highest-rate debt
4. When that debt hits zero, redirect the payment to the next highest-rate debt
5. Repeat until everything is paid off

A Real Example

Using the same three debts:

Debt	Balance	APR	Min Payment
Store card	$500	24%	$25
Credit card	$3,200	19%	$80
Car loan	$8,500	6%	$200

With the avalanche method and $200 extra per month:

Month 1-3: The store card has the highest rate (24%), so you target it first — same as snowball in this case. It’s gone in 2-3 months.

Month 4+: Next is the credit card at 19%. You pay $305/month until it’s done.

Final stretch: The car loan at 6% gets the full $505/month.

In this example, snowball and avalanche happen to follow the same order because the smallest balance also has the highest rate. That’s not always the case — and when the order differs, avalanche saves you more.

The Math Behind It

Every month, each debt charges you interest based on its rate. A $5,000 balance at 22% costs you about $92/month in interest. That same $5,000 at 6% costs only $25/month.

By eliminating the highest-rate debt first, you stop the most expensive interest charges as quickly as possible. The savings compound over time.

Pros and Cons

Pros:

• Saves the most money in total interest
• Mathematically optimal strategy
• Works especially well when rate differences are large
• Same snowball cascade effect once debts are paid off

Cons:

• First payoff can take longer if the highest-rate debt has a large balance
• Less psychologically rewarding early on
• Requires discipline to stick with it during the slow initial phase

When Avalanche Is the Right Choice

The avalanche method makes the most sense when:

• You have debts with significantly different interest rates
• You’re motivated by saving money rather than quick wins
• Your highest-rate debt isn’t massively larger than your other debts
• You’re disciplined and don’t need early wins to stay on track

When to Consider Something Else

If your highest-rate debt has a huge balance and you know you’ll lose motivation waiting months to see it paid off, the snowball method might serve you better. A strategy you abandon saves you nothing.

See Your Savings

Use our debt avalanche calculator to see exactly how much interest you’ll save with this approach. Compare it to the snowball calculator to see the real difference for your specific debts.

You have options, and you’re smart to research them. Whatever you choose, every extra payment gets you closer to debt-free.