How the avalanche method works
- Pay the minimum on every debt, every month.
- Put any extra money on the debt with the highest APR.
- When that debt is gone, move its whole payment to the next highest rate.
How it’s calculated
Monthly budget = sum of all minimums + extra payment
Each month:
1. interest on each debt = balance × APR ÷ 1200
2. pay every minimum
3. send what’s left to the highest APR (ties: smaller balance first)
4. when a debt reaches $0, its minimum rolls into the next target
Each month:
1. interest on each debt = balance × APR ÷ 1200
2. pay every minimum
3. send what’s left to the highest APR (ties: smaller balance first)
4. when a debt reaches $0, its minimum rolls into the next target
Worked example
The same three debts as on the snowball page, with a $150 extra payment:
| Target order | APR | Paid off in |
|---|---|---|
| 1. Visa ($3,200) | 24.99% | Month 16 |
| 2. Personal loan ($7,500) | 11.5% | Month 27 |
| 3. Medical bill ($600) | 0% | Month 12, by its own minimums |
Debt-free in 27 months with $1,832 of interest: $77 less than the snowball method and $2,582 less than paying minimums only.
Making the avalanche work for you
The first debt can take a while to clear, so track the falling total balance, not just paid-off accounts. Recalculate every few months with your latest balances to see your debt-free date move closer.
