How to use the debt avalanche payment strategy


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Paying off debt isn’t a one-size-fits-all transaction. What works for someone else might not work for you.

If you’re struggling to pay off debt, you may want to try using the debt avalanche method. Learn what it is and how to follow the system to see if it’s the right debt payment method for you.

What is the debt avalanche method?

The debt avalanche method is when you focus on paying off the debt with the highest interest first and work down from there. This strategy works because the less you pay in interest, the more you can put toward repayment of principal. You’ll still want to make the minimum payment on your other debts, but the intent is that you’ll lessen the total amount you owe over time.

The debt avalanche method is different from the debt snowball method, which concentrates on paying off your smallest debt first, regardless of the interest rate. Many people like the debt snowball method because it gives them an instant “win,” but they might not save as much money in their debt repayment as they would with debt avalanche.

How to use the debt avalanche method

To get started with avalanche debt repayment, list out all your outstanding debt. That includes:

  • Credit cards (each one).
  • Student loans.
  • Auto loans.
  • Personal loans.
  • Outstanding bills, like medical debt.

For each debt, list the amount you owe, the minimum monthly payments, the interest rate and the issuer. Arrange the list with the highest-interest debt first; then work on paying off that debt while making minimum payments on the rest. It’s important to stay current on all your debt so you don’t fall behind on payments and your credit score doesn’t plunge.

Every extra dollar you have should go toward paying off the debt with the highest interest. If you get a raise or bonus at work, start a side hustle or switch to bringing your lunch to work instead of buying it, use that money to pay off your high-interest debt.

You’ll do this until the debt with the highest interest is paid in full. Once it’s paid, move on to the next-highest-interest debt. You’ll be able to devote more money to each new debt, since you’ll have fewer to worry about over time. Update your list every month as your balance goes down and eventually gets paid in full.

Advantages of the avalanche debt payoff method

By paying off your highest-interest debt, you remove the debt that costs you the most money. While the debt snowball method might have quicker results, since you’re paying off a small debt sooner, it might not be the more cost-effective choice.

The debt avalanche method works best for those with high-interest debt, like credit card debt. Credit card interest rates can be in the double-digits. If you pay off your credit cards sooner, you’ll have more of your own money to put toward the things that matter most to you.

Alternatives to the debt avalanche method

When crippling debt looms, some people prefer to have smaller, achievable benchmarks when paying it off. If you’re one of those people, the debt avalanche method might not be the best for you. For one thing, it could take months of payments to see results.

The type of debt you have might also impact the method you choose. If you don’t have high-interest credit card debt — maybe you have student and auto loans instead — you may want to consider an alternative strategy.

Debt snowball method

With the debt snowball method, you focus on repaying the smallest debt first while paying the minimum amount on your other debt. Once you’ve paid off the smallest debt, move on to the next-smallest debt. You free up more and more money after each debt is paid, which means that it becomes faster to pay off the highest debt you have.

Balance transfer credit card

Many balance transfer cards offer 0 percent APR for a set amount of time, anywhere from 12 to 21 months. If you can move over high-interest credit card debt to a new card, you’ll be able to end the accruing interest that’s added every month. You’ll have to be cautious about racking up any new debt with your new card; and remember, when the 0 percent APR promotional offer ends, you’ll need to start paying interest if you can’t make payments in full every month.

Keep in mind that you may not be approved for the full amount of your outstanding credit cards. This means that you’ll be responsible for the balance on your new card, as well as any other cards that are still outstanding.

Debt consolidation

You can consolidate your debt through a few different options, including a debt consolidation loan. This is when you take out a loan for the full balance of your outstanding debt, pay off that debt, then make one payment to your personal loan every month.

If you have many different kinds of debt, including credit cards and student loans, this might work best for you. But consider taking out a loan only if the interest rate is less than what you’re currently paying. For instance, if you get a rate that’s lower than that of your credit cards but higher than that of your student loans, use a debt consolidation loan to pay off your credit cards. Then continue with student loan payments as normal.

Another debt consolidation option is a home equity line of credit (HELOC). With this type of debt consolidation, you borrow against the equity of your home — so it’s for people who have substantial equity in their home.

Debt management plan

If you’re struggling to repay your debt, you may need to reach out to a professional. Nonprofit credit counseling agencies can help you set up a debt management plan.

Depending on your situation, an agency may combine your debt into one manageable monthly plan. Sometimes they can cut your interest rates and negotiate with lenders to reduce what you owe. Keep in mind that not all debt will qualify for a debt management plan. Secured debt, like debt backed by a home or car, won’t be covered.

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Written by
Dori Zinn
Contributing writer
Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy.
Edited by
Student loans editor