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Debt

Debt avalanche

Also called: avalanche method, debt avalanche method

The debt avalanche is a payoff method that sends extra money to the debt with the highest interest rate while you keep making minimum payments on the rest. With a steady budget and unchanged rates, it generally costs less interest than other payoff orders.

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How it works

Rates, not balances, set the order here. Every account still gets its minimum payment, and any extra goes to whichever debt charges the highest rate. After that debt is paid off, the money that was going to it, both its minimum and the extra, shifts to the debt with the next-highest rate, continuing until nothing is left.

The logic is that each extra dollar goes where it prevents the most interest. That is why, with the same monthly budget and stable rates, the avalanche generally keeps total interest lower. The tradeoff is pace: if the highest-rate debt is also a large one, the first payoff can take a while, and progress may feel slower than with the snowball.

Because the order depends on rates, it can change when rates do. A promotional rate that is about to end, a variable rate that adjusts, or a penalty rate after a late payment can move a debt up or down the list. Checking each account’s current terms keeps the ranking accurate.

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Sources and further reading

Examples are illustrative and focus on U.S. personal finance. This page is educational, not individual financial, investment, tax, or legal advice. Read our editorial approach or report a correction.

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