The Avalanche Debt Repayment Method

The Avalanche Debt Repayment Method

If you have ever added up the total amount you pay in interest on all your debts each year, you probably ended up shaking your head in disgust. It is frustrating to pay interest on money you have borrowed, especially if you have debts that are being charged a high interest rate. The debt avalanche strategy can help you get out of debt while paying as little interest as possible by tackling the debts with the highest interest rates first.

How the Debt Avalanche Strategy Works

The debt avalanche method focuses on the power of each dollar to eliminate debt that is being charged a high interest rate. To get started, list all of your debts in order of interest rate, with the highest interest rate at the top of your list. Then, while making just the minimum payment on all your other debts, make as big of a payment as you can each month on the debt with the highest interest rate. Once you pay that off, start focusing your effort on the debt with the next highest rate and keep repeating the process until you are out of debt.

Should You Use the Debt Avalanche Strategy?

  • Do you like the satisfaction of knowing you are using your money as efficiently as possible to repay your debts? The debt avalanche method helps you cut down the amount of interest you are paying as quickly as possible.
  • Do you have the discipline to stick to your debt repayment plan for the long haul? The debt avalanche method does not always have a quick win because your highest interest debt may have a large balance, which could take many months, or even years, to pay off.
  • Do you have self-control with the way you spend your money? You will need to stick to a budget and carefully manage your bills to make the most of the debt avalanche and achieve your long-term financial goal of getting out of debt.