Paying off debt can feel slow and frustrating when your payments barely touch your balance. Many people contribute whatever they can each month toward their debt without a strategy, only to wonder why their debt doesn’t shrink. Minimum payments keep you current, but because they’re mostly applied to interest, your principal balance barely moves.
If your goal is to pay off debt faster while reducing the total interest you pay, the debt avalanche method is one of the most effective strategies. It focuses on paying down high-interest debt first so more of your money goes toward reducing the balance, not toward interest charges.
Here’s how the avalanche method works and why it can help you save money while becoming debt-free sooner.
What Is the Avalanche Method?
The debt avalanche method is a repayment strategy that prioritizes high-interest debts first. To use it, you list all your debts in order of interest rate, from highest to lowest, without worrying about the balance amounts. You continue making minimum payments on every debt, but any extra money goes toward the debt with the highest interest rate.
By targeting high-interest accounts first, you reduce how much interest you accumulate over time. More of your payment goes toward principal instead of interest, which helps you pay off your total debt faster and for less money overall.
How the Avalanche Payment Method Works
Here’s an example of how the avalanche method works in real life. Imagine you have three credit cards:
- $6,000 balance at 10% interest
- $4,000 balance at 15% interest
- $2,000 balance at 5% interest
Your minimum payments are $300, $200, and $100, so $600 total. Let’s say you have $1,000 available each month for debt repayment. Instead of splitting that money evenly across all three cards, the avalanche method focuses your extra payment on the debt with the highest interest rate.
Dividing the $1,000 evenly slows repayment and increases interest costs. Without a strategy, you’d need about 18 months to pay off all three debts, and you’d spend a full year paying 15% interest on the $4,000 balance.
The avalanche approach changes that by directing extra money toward the highest-interest account, helping you eliminate that balance sooner and reduce how much interest you pay overall.
How the Avalanche Payment Method Minimizes Interest Payments
With the avalanche method, you make minimum payments on all debts except the one with the highest interest rate. Any extra money goes toward that account until it’s paid off. This approach reduces the amount of interest you accumulate and speeds up your payoff timeline.
Using the same example:
- You pay the minimums on the 10% and 5% interest cards ($300 and $100).
- The remaining $600 goes toward the card with the 15% interest rate.
By targeting the highest-interest debt first, you eliminate that balance in about seven months instead of a full year. That means you stop paying 15% interest much sooner.
Once the 15% debt is gone, you roll the $600 you were paying into the next debt in line. Added to the $300 minimum you were already paying, you now have $900 each month to put toward the 10% interest balance. This accelerates your payoff and significantly reduces interest charges.
Finally, when the higher-rate debts are gone, the full $1,000 goes toward the smallest remaining balance. As a result, all three debts are paid off in about 12 months instead of 18—saving you money and time.
Read more: The Debt Snowball Method vs. Debt Avalanche Method
You Can Pay Off 18 Months of Debt in 12 with the Debt Avalanche
Using the debt avalanche method, the example repayment plan finishes in about 12 months instead of 18. That six-month reduction happens because you eliminate the highest-interest debt early, which slows the rate at which interest accumulates on your remaining balances. Once the most expensive debt is gone, your extra payment rolls to the next account, creating momentum and increasing your savings each month.
While the avalanche method is one of the fastest and most cost-effective ways to pay off debt, it may not be enough if your balances are already overwhelming or if you’re struggling to keep up with minimum payments.
If you need help exploring your options, speaking with a ClearOne Advantage debt specialist can provide clarity on next steps. Call 888-340-4697 to learn more or get a free savings estimate today.
FAQ
How can the debt avalanche method help me save money?
The debt avalanche method reduces how much interest you pay by targeting the highest-interest debts first. This helps more of your payment go toward the principal balance, lowering the total cost of your repayment over time.
What debts should I include in the avalanche method?
Include all unsecured debts with interest rates, such as credit cards, personal loans, and lines of credit. Student loans can also be included, though some borrowers choose to separate them because of special repayment programs.
How long does the debt avalanche method take to work?
The timeline depends on your total debt, interest rates, and how much extra money you can put toward repayment. However, by eliminating high-interest balances earlier, many people see faster progress compared to paying debts evenly.
Is the avalanche method better than the snowball method?
The avalanche method usually saves more money because it focuses on reducing interest costs first. The snowball method eliminates smaller balances faster, which some people find more motivating. The best method depends on your personal preferences and financial situation.
What happens if I can’t afford extra payments?
You can still use the avalanche method by making minimum payments on all accounts and directing any small amount of extra money toward the highest-interest debt. If minimum payments themselves are difficult, speaking with a certified debt specialist can help you explore other options.
Can the avalanche method be used with only one high-interest debt?
Yes. If you have one debt with a significantly higher interest rate, prioritizing it first can still save you money and speed up repayment.
