What is the debt avalanche method?
The debt avalanche method involves paying off your debt with the highest interest rate first while making minimum payments on the rest. Once your debt with the highest interest rate is paid off, you’ll move on to your debt with the next highest interest rate and continue this pattern until you’re debt-free.
“The debt avalanche method prioritizes interest rates to pay off debt with the highest interest rate first,” said Christopher Stroup, founder of Silicon Beach Financial. “Once the first is paid off, you move on to the next highest-interest-rate debt.”
How to use the debt avalanche method
Here are the steps for setting up the debt avalanche method:
1. Make a list of your debts
Make a list of your debt, such as debt from credit cards, student loans, auto loans or personal loans. Then, sort your debts by interest rate, from the highest rate to the lowest rate. This will become the order in which you start paying off your debts.
2. Focus on paying the highest-interest debt
Next, devote as much money as you can each month toward paying off your highest-interest debt first. Perhaps you can set a budget to cut back on nonessentials or start a side gig to bring in extra money each week. Also, continue making minimum payments on the rest of your debts to protect your credit.
3. Repeat the process
After your debt with the highest interest rate is fully repaid, start focusing on the debt with the second highest interest rate. Continue this process until you’re debt-free.
Debt avalanche payoff example
Let’s say you have the following accounts to pay off, which you’ll organize by the highest to lowest interest rate:
- Credit card No. 1: $2,100 with a 29% annual percentage rate (APR)
- Credit card No. 2: $1,500 at 26% APR
- Personal loan: $1,000 at 11% APR
- Auto loan: $9,000 at 8% APR
- Student loans: $14,000 at 6% APR
With the debt avalanche method, you’ll focus on maximizing payments toward the first credit card with the 29% APR while making minimum payments on the other debts. So, if you have around $500 or more to put toward your first credit card bill each month, you should be able to pay off your bill within about five months.
Once you pay off the first credit card, you’ll start focusing on paying off the second credit card, followed by the personal loan, then the auto loan and then the student loans.
» MORE: Ways to pay off debt
Advantages of the debt avalanche method
Paying off your debt in order of highest to lowest interest rate provides some advantages:
- It reduces your total interest paid. By paying off your highest-interest debts first, you’ll shrink the amount of interest you’ll pay in total.
- It can reduce the amount of time you’ll be in debt. In some circumstances, reducing your total interest paid will also accelerate your path to becoming debt-free.
Disadvantages of the debt avalanche method
The main disadvantage of the debt avalanche method is that it requires discipline, and it will generally take longer to see results.
- It may take longer to pay off individual debts. If your highest-interest debt also has a high balance, it may take months or years before you fully pay it off.
- It requires patience. The debt avalanche method doesn’t necessarily provide quick wins since it can take longer to pay off debts, which may be demoralizing to some people.
Alternatives to the debt avalanche method
If the debt avalanche method isn’t right for you, consider some alternatives:
Debt snowball method
The debt snowball involves paying off your debt from the lowest balance to the highest balance. Some people find this method to be more motivating than the debt avalanche method since it provides quick wins.
Balance transfers
If you have high-interest credit card debt, you may be able to transfer your balance to a balance transfer credit card with a 0% intro APR. These types of cards typically provide up to 21 months to pay off your balance interest-free. However, note that there’s usually a balance transfer fee of 3% to 5% of the transferred balance.
Debt consolidation loans
Debt consolidation loans are personal loans specifically designed to help you pay off debt. With this type of loan, you’ll combine your loans into one loan with one monthly payment, which can help make debt payoff more manageable. You may also be able to qualify for a lower interest rate, allowing you to save money on interest.
Debt management plan
Debt management plans (DMPs) are commonly offered by credit counseling agencies. They’re designed to help you fully repay your unsecured debt over time. With a DMP, your credit counselor will often negotiate lower interest rates and reduced fees with your creditors.
» MORE: Debt snowball vs. debt avalanche
FAQ
Which is better, debt avalanche or snowball?
The debt avalanche method is typically the better method since you’ll pay less interest over time and you might get out of debt faster. But if you’re more motivated by short-term results and having fewer debts to worry about, the snowball method may be a better fit.
If two debts have the same interest rate, which do I pay off first?
In this situation, it may be wise to allocate more of your funds toward repaying the smaller of the two debts first. Paying off a debt quickly could boost your motivation by giving you a sense of progress and achievement.
What are some common mistakes to avoid with the debt avalanche method?
When using the debt avalanche method, you should avoid taking on more debt while you’re working to pay off your existing debt. It’s also best to make sure you won’t incur a prepayment penalty by paying off your debts.
Bottom line
The debt avalanche method prioritizes paying off your highest-interest debt first while making minimum payments on the rest. This approach can save you on interest charges and help you get out of debt faster, but it requires discipline since you may not pay off individual debts as quickly as you’d like to.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- Consumer Financial Protection Bureau, “What Is the Difference Between Credit Counseling and Debt Settlement, Debt Consolidation, or Credit Repair?” Accessed Jan. 31, 2026.
