Debt avalanche method
Pay off your highest-interest-rate debt first regardless of balance. Mathematically optimal for minimising total interest paid.
The debt avalanche method orders your debts by interest rate, highest to lowest, and attacks them in that order. You pay the minimum on every debt, then throw every extra dollar at the highest-rate balance. When it's gone, you move to the next-highest.
Mathematically, this is optimal. Every dollar of interest you pay is dollars not going to balance — so silencing the loudest interest first is strictly better than tackling any other order. On a typical mix (credit cards at 22%, car loan at 7%, mortgage at 5%), the avalanche can save thousands compared to the snowball method.
The downside is psychological. Your highest-rate debt is often also large (credit cards build up fast), so you can grind for months without closing an account. The "win" of paying something off entirely — the part the snowball is built around — comes later in avalanche.
Pure-math people pick avalanche. People who've tried and failed at debt payoff often do better with snowball. If you're not sure which you are, try avalanche for two months. If you're still motivated, continue. If you've stalled, switch.
See also
- Debt snowball method — Pay off your smallest debt first regardless of interest rate, then roll its payment into the next-smallest. Optimised for motivation.
- Minimum payment trap — Paying only the minimum on revolving debt keeps you in debt for years and triples or quadruples what you originally borrowed.
- APR (Annual Percentage Rate) — The yearly cost of borrowing money, expressed as a percentage and including most fees — not just the interest rate.
Ask Cashowa about debt avalanche method
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