The avalanche method, explained

Resources · Paying off debt · 4 min read Starting out

Key points

• The avalanche method pays off the debt with the highest interest rate first.
• You keep paying minimums on everything else and send any extra to that one debt.
• It usually means the least total interest and, often, an earlier finish.
• The first debt may take longer to clear, so early wins can feel slower.

How the avalanche method works

Line up your debts by interest rate, highest to lowest. Not by balance. The rate decides the order.

Then, every month, you do three things in order:

1. Pay the minimum on every debt.
2. Send every extra dollar to the debt with the highest rate.
3. When that one’s gone, add its whole payment to the debt with the next highest rate.

Your total monthly payment never changes. It just slides down the list as each debt disappears.

Why the order matters

Interest is charged as a percentage of what you owe. So a dollar sitting on a 24% debt costs you more each month than a dollar on an 11% debt. Send your extra dollar to the highest-rate debt and it stops more interest from piling up than it would anywhere else.

Small differences. But over months, they add up.

A worked example

Here are three debts. The maths works the same in any currency.

The minimums come to $430. Say you can pay $650 a month in total. That leaves $220 extra.

The assumptions: interest is charged monthly at the yearly rate divided by 12, on the balance before that month’s payment. Minimums stay fixed. Nothing new gets added to the debts. The last payment on each debt is whatever clears it.

Avalanche order is highest rate first. That’s Card B (24%), then Card A (18%), then the loan (11%).

Card B is paid off in month 20. Its $150 plus the $220 extra now go to Card A. By month 23, Card A is gone too, and everything rolls onto the loan. In month 32 the loan is paid off and you’re debt-free.

Total interest paid: $3,675.50.

Now compare. Paying the smallest balance first instead (the snowball method) takes 33 months and $3,860.24 in interest. So in this example the avalanche saves $184.74 and one month. The trade-off? Your first payoff lands in month 20, compared with month 8 under the snowball.

When the avalanche method makes a bigger difference

How far apart the two orders end up depends on your numbers. The gap tends to widen when one debt carries a much higher rate than the rest, especially if that same debt also has a large balance. It grows again when your extra payment each month is sizeable, because the order then has more money to work with.

When rates sit close together, the two orders often finish within a month or two of each other.

The trade-offs

On paper, the avalanche squeezes the most out of every dollar. But plans get carried out by people, not spreadsheets.

The big one is the wait for a first win. If your highest-rate debt is also your biggest, it could be a long while before anything is fully paid off. Some people find a long stretch with nothing crossed off really hard to stick with. Rates can change on you too. If a promotional rate ends, for example, your order may need updating.

Some people love the avalanche because the lower total cost motivates them all by itself. Others need quicker wins to keep going. Both are fair. Pick the one you’ll actually stick with, and if you’re torn, read snowball or avalanche: how to choose.

Tips for sticking with it

Track the interest you’re avoiding, not just your balances. Watching the monthly interest charge shrink is its own reward. Set yourself smaller milestones along the way, like every $1,000 knocked off the target debt.

Keep every minimum current. No exceptions. Missed payments can bring fees and, in some cases, higher rates. And revisit your list whenever a rate or balance changes.

Common questions

Does the avalanche method save the most money?

Usually it means the least total interest, because your extra money goes to the debt that costs the most each month. How much you save depends on your rates, balances and extra payment. When rates are close together, the difference can be small.

Is the avalanche method better than the snowball method?

Not for everyone. The avalanche often costs less in interest. The snowball gives you earlier wins. Which one suits you depends on what will keep you going.

Do I keep paying my other debts with the avalanche method?

Yes. You pay the minimum on every debt and send any extra to the highest-rate one. Missed payments can bring fees and, in some cases, higher rates.

Try it

Put in your own debts and see how the order changes your timeline: find your Freedom Date. Focused on a single card? The credit card payoff calculator shows what each extra dollar does.

General information only, not financial advice. Your situation is your own.