The Debt Avalanche Method: How It Works and When to Use It

What Is the Debt Avalanche Method?

The debt avalanche method eliminates your most expensive debts first, earning you returns on your money more quickly. The debt avalanche method is useful because it gives you a framework for deciding which debt to prioritize. Compared with other debt paydown strategies, the debt avalanche method also has the potential to save you the most money on interest.

Loans and credit cards generally collect interest on top of the principal balance you've borrowed, or on top of the credit card charges you've made. Taking on debt can end up being far more expensive than you initially planned due to compound interest. As interest is added to your debt, further charges are calculated based on the new, larger total. Your minimum payment might not be enough to cover all the interest that's accumulated over time.

When you get rid of debts using the debt avalanche method, you stop the growth of compound interest and earn back the equivalent of the high interest rates you'd been paying.

How the Debt Avalanche Method Works

Here's a step-by-step guide for how to use the debt avalanche method to get out of debt.

1. List all your debts. Using a spreadsheet or a debt payoff app, list each of your debts along with its outstanding balance, type of debt (credit card or loan), monthly or minimum payment, interest rate and due date.
2. Rank your debts by interest rate. Put the debt with the highest interest rate or APR at the top of the list, followed by the next-highest. If your interest rate is variable, use the current rate. You can always reorder the list later if necessary.
3. Choose an extra amount to pay. Based on your budget, decide how much extra you can afford to pay toward your debt. Add that amount to your minimum monthly payment on your highest-rate debt while making the minimum payments on your other debts.
4. Apply your previous monthly payment to the next debt. When your first debt is paid off, celebrate. Then, you'll apply the extra amount, plus more if you can spare it, to your debt with the next-highest rate until that account is paid off.
5. Continue until your debts are paid off. Work your way down the list until all your debts are gone.

Debt Snowball vs. Debt Avalanche Method

The debt snowball method is an alternative that recommends paying off your smallest balance first, no matter the interest rate. You may not see the same interest savings over time, but it gives you the opportunity to feel successful faster. Experiencing victories early could keep you going, and ensure you make it to the end of your debt payoff journey.

A major drawback of the debt snowball method, though, is that you'll likely save less money than you would using the debt avalanche. That makes the debt avalanche method a superior strategy in most cases.

Debt Snowball vs. Debt Avalanche Example

Let's say you have three credit card balances:

1. $8,000 at 18% APR
2. $3,000 at 20% APR
3. $5,000 at 22% APR

If you make only the minimum payments on each debt—which are typically calculated as 1% to 4% of your outstanding balance—you could pay more than $9,000 in total interest. If you pay $400 per month toward the highest-rate debt first using the debt avalanche method, you'd save almost $2,400 in interest charges. By putting $400 toward the smallest balance first, using the debt snowball method, you'd save about $1,500 in interest charges.

Here's how the debt avalanche and debt snowball methods compare.

As you can see, either method provides significant interest savings over making only the minimum payments each month. However, take the time to consider which approach may work better according to your unique financial habits.

Pros and Cons of the Debt Avalanche Method

Here are the primary benefits of the debt avalanche method:

When to Use the Debt Avalanche Method

It could make sense to use the debt avalanche method in these scenarios:

• You're motivated by savings. If knowing you'll save more money this way is at all enticing, go with the debt avalanche method. It's the most cost-effective strategy for paying off multiple debts, and if you can ride out the times when progress feels slow, you'll enjoy the benefit of substantial interest savings.
• You have particularly high-interest debt. You stand to benefit even more from using the debt avalanche when your debts have high rates. Credit cards, personal loans and payday loans can all have particularly high interest rates—the average credit card APR was 22.25% in May 2025, according to the Federal Reserve. They're good candidates to target for payoff because you'll see the most savings this way.
• You're committed to sticking with your plan. While the debt avalanche may not be as motivating as the debt snowball, that isn't a problem when you already feel a lot of enthusiasm to get rid of your debt, or you use strategies like gamification to make it exciting.

Learn more: Steps to Get Out of Debt

The Bottom Line

Using a method like the debt avalanche puts you in more control of your finances. When you make a plan, you'll more deeply understand the concepts of minimum payments, interest rates and payoff timelines. You'll feel empowered to tackle your debt and proud as you make headway. If you've felt overwhelmed and afraid to take the first step, the debt avalanche method is a framework that can get you back in the driver's seat—and save you money along the way.