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Debt Avalanche


A debt reduction method whereby an individual who owes more than one debt pays off the debt with the highest interest rate, and them moves on to the debt with the next “highest” rate, and so on. This methods allows debtors to knock off the most burdensome debt first, since a higher interest rate means debtors pay more in the long run. By extinguishing the highest interest-rate debt first, a debtor will pay less in the long run.

In other words, this method involves paying down the balance that costs the most money and then moving on to the next costliest debt until all debts outstanding are paid off. This process is called “debt avalanche”, where debtors start from the top and work down, like an avalanche of snow sliding down a mountain.



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