The debt avalanche method is a repayment strategy where you focus on paying off debts with the highest interest rates first, while continuing to make minimum payments on other debts. This minimizes the total interest paid over time.
How It Works
- List all debts from highest interest rate to lowest.
- Pay as much as possible toward the debt with the highest interest rate, while making minimum payments on the rest.
- Once the highest-interest debt is eliminated, move to the next highest.
- Repeat until all debts are repaid.
Why It Works
By targeting high-interest debts first, you save the most money in interest charges. This method is mathematically the most cost-effective way to pay off debt, though it may take longer to see psychological wins compared to the debt snowball method.
Final Thoughts
The debt avalanche method is ideal for disciplined borrowers focused on minimizing costs. While it may not feel as motivating as the snowball method, it leads to the fastest and cheapest path to debt freedom.