How to Use the Debt Avalanche to Pay Off Debt

Is the Avalanche Method the best way to pay off debt?


As we continue our debt series, breaking down 5 of our favorite debt elimination strategies, we’ll be putting the magnifying glass on the Avalanche Method, today. 


But first, If you haven’t read the introductory blog in this series where I broke down 5 of the best debt payoff methods and then gave my input as to which one is best, you can check it out here. Also, we’ve already done a deep dive into the Snowball Method which you can check out here.  Now that we got some housekeeping out of the way, let’s move on! 


The Avalanche Method is praised by many financial experts as being the fastest and least expensive way to pay off debt, mathematically speaking. This is due to the fact that it focuses its order of operations on paying off the debts with the highest interest rates first, thus crushing those most costly accounts early on in the game.  

Real Life Scenario

Here’s how this would look in a real life situation.  In the Debt Snowball breakdown from our previous post, we used a pretend person named Sally who set up her debt payoff system using the Snowball Method.  Let’s run her same numbers as if she chose to go with the route of the Avalanche Method. 


Here’s how Sally’s list would look:


  • Credit Card: $1,000, 20% interest, $20 minimum payment
  • Car Loan: $7,000, 6% interest, $350 minimum payment
  • Student Loan: $12,000, 5%, $200 minimum payment
  • Friend Loan: $300, 0% interest, flexible payments


The only difference between Sally’s Avalanche Method list and her Debt Snowball list is that her Friend Loan went from the top of her order of operations (since it had the lowest balance) to the bottom (since it has the lowest interest rate).


If Sally were to go with the Snowball Method (paying off her Friend Loan first instead of last) and put an extra $300 towards her debts each month, she’d be debt free in 23 months with $1,145 paid in interest. 


Interestingly, if she were to go with the Avalanche Method and still put an extra $300 toward her debts each month, she’d have them paid off in the same amount of time with the exact same amount paid in interest. The only difference would be the order in which she paid off her debts. Of course, Sally’s friend who loaned her the $300 might have some input as to which method Sally should go with! 


Now, let’s pretend Sally’s credit card balance was actually $10,000 with a $200 minimum payment and the same interest rate while still putting an extra $300 towards her efforts.  In that case, the Snowball Method would take her 30 months to pay off her debts with $4,323 paid in interest while the Avalanche Method would take her the same amount of time but she’d pay $3,811 in interest. That’s a savings of $512!


I’ve found on many occasions that when I plug my clients’ numbers into a Snowball vs. Avalanche calculator, it would take them roughly the same amount of time to pay off their debts regardless of the method they chose. 


That being said, if you have a significant amount of debt, the Avalanche Method does typically save the most money in interest payments which is an important factor to consider! I recommend running your own numbers to see how this plays out with your situation.  

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Who do we recommend the Avalanche Method for?  

After running your numbers, if you find that the Avalanche Method would save you time and/or money on your debt payoff journey, it might be worth moving forward with. This is especially true if you aren’t overwhelmed by the balance of your debt with the highest interest rate, since that’s the one you’d be tackling first. 


However, if you find that there’s not much of a difference between the Snowball Method and Avalanche Method with your specific numbers then I recommend going with the one that resonates with you more.  


Are you more motivated by quick wins?  The Snowball Method might be a good strategy for you!  Are you more numbers oriented?  Great!  You’d probably be a good fit for the Avalanche Method. 


Now, here I am talking as if the Snowball and Avalanche are the only debt payoff strategies that exist.  Not so!!  They’re certainly the most popular but I’ve got a few other tricks up my sleeve – or, I guess, methods that I’m aware of.  Stay tuned as I’ll be dropping future blogs that will go more in depth into the Highest to Lowest Payment Method, the Emotional Heaviness Method, and what I like to call “The Score Method”.


Of course, if you’d like help running your numbers, we have coaches on standby who would love to offer their assistance.  Not only can they compare the numbers with you, but they’ll help you choose the strategy that will work best for you on a more personalized, holistic level.  Schedule a call with one of our coaches and we’ll help get your finances moving in the right direction!

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