How the debt avalanche method works
The debt avalanche method pays off your debts in order of interest rate, highest APR first. You pay the minimum on every debt, send all the extra money you can to the debt with the highest rate, and when it is paid off, you add that payment to the debt with the next highest rate. Because it targets the most expensive interest first, it usually costs less in total interest than other orders.
This guide explains the steps, shows why the highest rate matters more than the largest interest charge, and follows a hypothetical set of debts through each stage.
The steps
- List every debt with its balance, APR, and minimum payment.
- Sort by APR. Put the highest rate at the top. If two debts share a rate, our calculator puts the smaller balance first.
- Set one monthly budget that covers all the minimums, plus whatever extra you can add.
- Pay the minimums, then the target. Every month, pay each minimum and send the extra to the highest-rate debt.
- Roll the payment forward. When the target is paid off, keep the budget the same and move its payment to the next highest rate.
Why the rate decides, not the interest charge
A large balance at a moderate rate can charge more interest each month than a small balance at a high rate. It might seem logical to target whichever debt charges the most interest in dollars. But what matters is how much interest each extra dollar stops. A dollar paid toward a debt at a higher APR stops more interest than a dollar paid toward one at a lower APR, whatever the balances are. That is why the avalanche ranks by rate.
Worked example: an avalanche, stage by stage
The examples use a hypothetical household with four debts totaling $21,000, minimum payments of $630 a month, and a budget of $900 a month for debt, which leaves $270 a month above the minimums. These are made-up numbers, not typical rates or balances.
| Debt | Balance | APR | Minimum payment |
|---|---|---|---|
| Store card | $1,200 | 19.9% | $35 |
| Credit card | $6,500 | 24.9% | $195 |
| Personal loan | $3,500 | 11% | $110 |
| Car loan | $9,800 | 7% | $290 |
Ranked by rate, the order is credit card (24.9%), store card (19.9%), personal loan (11%), car loan (7%). In the first month, the interest each debt charges is $19.90 on the store card, $134.88 on the credit card, $32.08 on the personal loan, and $57.17 on the car loan. The car loan charges more than the store card in dollars, but at a much lower rate. Using the same math as our calculator:
| Stage | Target debt | Paid to the target each month | Paid off in |
|---|---|---|---|
| First | Credit card | $465 | month 17 |
| Second | Store card | $500 | month 19 |
| Third | Personal loan | $610 | month 22 |
| Last | Car loan | $900 | month 27 |
The credit card gets $465 a month: the $270 above the minimums plus its own $195 minimum. Once it is gone, the store card gets $500, the personal loan $610, and the car loan the full $900. All four debts are paid off in 27 months, with $3,088.84 in total interest.
What happens to the other debts while you wait
While the avalanche focuses on the highest rate, the other debts still get their minimums every month, so they shrink too. In the example, the store card is not targeted until the credit card is paid off, but by then its balance has fallen from $1,200.00 to $758.46 from its minimum payments alone. That is why it is cleared only two months after the credit card, in month 19.
The downside is that the first payoff can take a while. If your highest-rate debt is also a large one, many months may pass before any debt disappears. In the example, the first payoff comes in month 17, compared with month 5 under the snowball.
How it compares
In the example, the avalanche finishes in 27 months with $3,088.84 in interest. The snowball, paying smallest balance first with the same budget, takes 28 months and costs $3,564.79, so the avalanche saves $475.95. Both are far ahead of paying only the minimums, which takes 58 months and costs $7,064.93; the avalanche saves $3,976.09 and 31 months against that baseline. For more on how the gap changes, see which method saves more interest.
When rates change
The avalanche order is based on the rates you enter. If a rate changes, for example when a promotional rate ends or a variable rate moves, the order may change too. Our calculator assumes fixed rates for the whole plan, so it is worth rerunning it whenever one of your rates changes.
Common questions
Should a 0% debt go last?
In an avalanche, a debt at 0% sorts to the bottom because it charges no interest. If a 0% rate is promotional and will rise later, you may want to plan around the rate it will become.
Does the avalanche work with only a little extra money?
Yes. Even a small amount above the minimums is directed to the highest rate, and freed-up payments still roll forward. More extra money shortens the plan.
The takeaway
The debt avalanche pays every minimum and sends extra money to the highest APR first, rolling each freed-up payment into the next highest rate. It usually costs the least interest, but the first payoff can take longer than with the snowball. Rerun the numbers when a rate changes.
This guide is educational only and is not financial, tax, or legal advice. The example uses hypothetical numbers; your lender or card issuer sets your actual terms. See how our calculators work.
Some pages on SmartCashLab may include affiliate links, and if you use one we may earn a commission at no extra cost to you; this guide contains no affiliate links, and compensation never changes our calculator results. Read our affiliate disclosure.