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What’s the debt avalanche method?

How paying off your highest-interest debts first can save you in the long run.

If you’re looking for the best way to pay off debt, there’s a good chance you’ve heard of Dave Ramsay’s debt snowball method, which involves tackling small debts first as motivation to pay down larger debts. However, his method receives criticism for allowing interest to accrue on larger debts, which is where the debt avalanche method comes in.

What’s the debt avalanche method?

The debt avalanche method is an accelerated debt payoff plan. Unlike the debt snowball method, which pays down your smallest debts first, the debt avalanche method focuses on paying off your highest-interest debts first.

The debt avalanche method is calculated by ordering your debts from the highest interest rate to the lowest. After making the minimum payment on all of your debts each month, you then put any leftover money toward your debt with the highest interest rate.

Once the debt with the highest interest rate is paid off, you put that minimum payment and any extra money toward your next highest-interest debt, and so forth, until all of your debts have been repaid.

How does it work?

To make the debt avalanche method successful, there are some steps to follow:

  1. Organize your debts. Write down all of your debts and rank them from highest interest to lowest interest.
  2. Review your budget. Determine how much of your monthly budget can be dedicated to paying down debts.
  3. Make minimum payments. Now that your debts have been organized and your budget streamlined, make the minimum payments on all of your debts.
  4. Pay down with extra cash. Use the extra cash in your budget to make a larger payment toward your highest-interest debt.
  5. Move on to the next. Once your highest-interest debt has been paid off, use any cash that would have gone toward that to pay down your next highest-interest debt.
  6. Repeat. Repeat this strategy every month until you’ve completely wiped out all of your debts.

Doing the math

Let’s take a look at an example: Catherine is a single woman in her early 30s and has finished paying off her federal student loans for her undergraduate degree.

The amount she can spend on her debts each month is $500. She has two credit cards, a car loan and a personal loan. She’s decided to use the debt avalanche method to save on interest in the long run and open up room in her budget for a mortgage payment down the road.

DebtBalanceMinimum paymentAPR
Credit Card A$1,500$4518.99%
Credit Card B$4,000$8015.45%
Personal Loan$3,000$7013.1%
Car Loan$5,000$1206.99%

As you can see, her car loan takes up the majority of her monthly budget, but it’s the two credit cards that are actually the most costly when you order things based on APR.

Since Catherine has $500 to put toward paying off her debts each month, she’d make the minimum monthly payment for each bill — totaling $315 — then put the remaining $185 toward Credit Card A until it’s fully paid off.

After, Catherine would tackle Credit Card B by combining that $185 with the $45 monthly payment for Credit Card A she no longer has, then repeat the process until all of her debts are paid off.

What if my debt is already in collections?

It’s wise to prioritize accounts in collections — even if they’re not the smallest. You may be able to negotiate your debt down by speaking to the collection agency and explaining your situation. Accounts in collections can do major damage to your credit score as well.

To learn more about how it all works, read our guide to the debt collection process.

What do the experts say?

Unlike the debt snowball method, the debt avalanche method focuses on math to determine the most efficient and cost-effective way to pay off debt. While this method won’t provide motivation along the way, it will save you more money in the long run because it decreases the amount you’ll be paying in interest.

Consumers who pay off smaller balances in full were able to get out of debt faster than those who focused on larger amounts, recently determined by The Journal of Consumer Research. However, this doesn’t take into account how much more money you’d end up spending on interest. From a purely mathematical standpoint, the debt avalanche method is the best debt payoff strategy, but only if you’re able to commit to the plan.

Is the debt avalanche method right for me?

Like any financial strategy, there are pros and cons to the avalanche method.


  • Quickest way to pay off debt.
  • Visualize your financial situation to plan for the future.
  • Minimize interest payments for most cost-efficient debt repayment.


  • No psychological motivation from paying off small debts.
  • Can be tough to stay on track without checkpoints.

Debt avalanche vs debt snowball

If you want more motivation, use the debt snowball method to pay down smaller debts first. The debt snowball method is one of the more popular debt payoff strategies, as it focuses on paying off small debts to motivate you to pay down the larger ones.

You’ll start by organizing your debts from smallest to largest, then allocate any extra money in your budget to pay off the smallest one first. As you pay off your debts, you’ll free up more money, which can help you pay off even more bills.

But the snowball method doesn’t take interest into account like the avalanche method, so your debts will cost more in the long run.

Debt avalanche vs debt snowflake

The debt snowflake method is a lesser-known approach, and is compatible with both the debt snowball and debt avalanche methods, helping you pay off debt sooner.

It works by adding up small day-to-day savings to increase your monthly budget for debt repayment. Either do this yourself by making conscious decisions to save in everyday situations or use an app that rounds up your purchases.

In any case, these small daily savings will add up over time, allowing you to make larger payments toward your debts.

Alternatives to the debt avalanche method

If the above methods won’t work for your budget, consider these alternatives.

  • Debt consolidation. Debt consolidation is the process of taking out one loan to pay off a number of others. It’s best used when you have multiple high-interest debts, as there’s a good chance the debt consolidation loan will have a lower interest rate, therefore saving you money in the long run.
  • Balance transfer credit card. This option involves moving your debt onto a balance transfer credit card, typically with the intent of putting your debt onto an account with a lower interest rate that saves you money.
  • Debt relief. Debt relief is a partial or total forgiveness of debt. It can be done by reducing the outstanding principal amount, lowering interest rates or extending the loan term.

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