What is the Debt Avalanche Method?
The debt avalanche method is a debt repayment strategy where you pay off debts in order of highest to lowest interest rate. After making minimum payments on all debts, you put any extra money toward the debt with the highest interest rate. This approach minimizes the total interest you pay over time.
How the Debt Avalanche Works
- List all your debts with their balances, interest rates, and minimum payments
- Make minimum payments on all debts
- Put any extra money toward the debt with the highest interest rate
- Once that debt is paid off, roll that payment into the next highest-rate debt
- Repeat until all debts are paid off
Avalanche vs. Snowball Method
The debt snowball method pays off smallest balances first for psychological wins, while the avalanche method targets highest interest rates first for maximum savings. The avalanche method typically saves more money but may take longer to pay off your first debt.
Advantages of the Avalanche Method
- Saves the most money on interest over time
- Mathematically optimal debt payoff strategy
- Reduces total debt faster than minimum payments
- Works well for disciplined individuals focused on numbers
How to Use This Calculator
- Enter how much extra you can pay each month beyond minimums
- Add all your debts with their names, balances, APRs, and minimum payments
- Click "Calculate" to see your payoff schedule and interest savings
