At a Glance

What’s the strategy for the debt avalanche method?

The strategy for the debt avalanche method is to target high-interest debt first to minimize the amount of interest you’ll pay over time. Essentially, you throw as much money as possible at your highest-interest debt while continuing to make minimum monthly payments on all other debts. Once you’ve paid off the highest-interest debt, you move on to the next highest-interest debt, taking what you would’ve put toward the highest-interest balance and putting it toward the next highest, continuing this pattern until you’re completely debt-free.

Estimate your savings with this debt avalanche calculator

How many debt accounts do you have?

Include all your credit cards and loans, except mortgage(s). The avalanche method is applicable if you have two or more debts.

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Keep your credit and loan statements handy to fill in balance, payment and rate details.

How to use the debt avalanche calculator

1. Plug in your debt details

Include all your debts—minus mortgage(s), if you have any—with the account types, balances, interest rates, and minimum amount due each month.

2. Determine which debt to start repaying first

Our debt avalanche calculator will show you which debt to start repaying first based on your balance with the highest interest rate. You’ll continue to make minimum monthly payments on all other accounts while putting as much as possible toward your balance with the highest interest rate.

3. Decide how much you can put toward your highest-interest balance

Figure out how much you can realistically put toward that highest-interest balance based on the rest of your budget, including making minimum payments on your other debts. Always make sure you’re prioritizing your essential needs when determining how much you can afford for debt repayment.

Is the avalanche method right for you?

The debt avalanche method could be a good fit for you for paying off debt if:

  • You want to save money on interest
  • You have multiple high-interest debt balances
  • Your largest balance is a high-interest credit card or loan
  • You’re more motivated by financial gains than quick wins
  • You’re confident and optimistic about your ability to repay your debt
  • You’re patient and disciplined when it comes to repaying debt

Debt avalanche vs. debt snowball: What’s the difference?

While the debt avalanche method prioritizes paying off the balance on your highest-interest debt first and working your way down to the lowest-interest debt, the debt snowball method focuses on paying down the smallest balance first and working your way up to the highest balance.

With both approaches, you continue to make the minimum monthly payments on all of your debts while throwing as much as possible at either the highest-interest debt for avalanche or smallest balance for snowball. Once you’ve paid off one balance, you move to the next highest-interest debt or the next smallest balance, and so on.

The goal of the debt avalanche method is to save as much money on interest over the long haul as possible, while the goal of the debt snowball method is to pick up quick wins along the way and build momentum on your debt repayment journey. If you’re not confident you can be patient and disciplined with the debt avalanche method, the debt snowball method may be a better fit.

Much like our debt avalanche calculator, our debt snowball calculator can help you see how that method would play out with your individual financial circumstances.

Debt avalanche calculator terms and definitions

  • Creditor: A person or entity that allows someone to borrow money and repay it later.
  • Balance Owed: The amount of money that is due to be paid by a certain date.
  • Interest Rate: The percentage of the principal that a lender charges to borrow money.
  • Payment Amount: The total paid toward a bill.
  • Interest Cost: The amount of interest a borrower pays over the course of a loan or other debt.
  • Payment Schedule: The structure of dates when the borrower is expected to repay the lender.

Other debt payoff methods

  • Debt snowball: You know this one by now. It’s kind of like the opposite of the debt avalanche method.
  • Hybrid debt payoff approach: Can’t make up your mind between the debt avalanche or debt snowball method? You don’t necessarily have to. There are several ways to combine the two into a hybrid approach, including treating smaller debts and larger debts differently, changing your strategy based on the type of debt (installment vs. revolving), and using the debt-to-income ratio approach.
  • Debt consolidation: A debt consolidation loan allows you to combine multiple debts into a single monthly payment, ideally with a lower interest rate to help you save money on interest, lower your monthly payment, or get out of debt more quickly.

FAQs

Before starting the debt avalanche, you should make sure you’re ready to commit to repaying your debt and stop piling on additional debt.

Once you’ve gotten the debt avalanche going, you should keep it up until you’ve paid off debt, except in a few situations when you’ve experienced or will soon experience a major life change or emergency, like:

  • Starting a new job
  • Getting a divorce
  • Having a kid
  • Moving

You shouldn’t pause your debt avalanche repayment plan because you want to spend on frivolous things, like a fancy vacation or the newest iPhone.

Common mistakes to avoid while using the debt avalanche method, or most debt repayment plans, for that matter, include:

  • Continuing to build debt on credit cards and loans
  • Not rolling over payments you’re making on your highest-interest debt to the next highest-interest debt once you pay off that balance in full
  • Trying to focus on more than one debt at a time
  • Ignoring or forgetting other bills while focusing on debt
  • Not tracking your progress

The biggest advantage of the debt avalanche method is that by focusing on paying off the highest-interest debt first, you’ll greatly reduce the amount of interest you’ll owe as you continue to pay off your debt. It also helps reduce the amount of time it will take to get out of debt since less interest is accumulating.

This depends on how much debt you have and what the interest rates are. The more debts and/or the higher the interest rates, the longer it will take. That’s why it’s important to stick to the method and not get discouraged. In the end, you’ll end up saving money and paying off your debts much faster than if you just made minimum payments.

If you have multiple high-interest debts, are confident you can stick with it, are currently building credit, or don’t want to apply for another credit card or loan for consolidation, this can be a good idea. You must have enough to make minimum payments with extra funds left over, so if you don’t have any disposable income, the debt avalanche can be difficult.