Wondering what the debt avalanche method is, and how it works to get you out of debt?
In short, the term “debt avalanche” describes the order you pay down your debt in, and that order is based entirely on the interest rates you’re being charged. (A debt avalanche is sometimes also known as “debt stacking”.)
Here’s why you might (or might not) want to use a debt avalanche to pay down your debt.
Details of how the debt avalanche works
A debt avalanche works like this: you make a list of all your debts and then place them in repayment order from highest interest rate to lowest interest rate, regardless of the amount you owe on each one.
While you do make minimum payments on all of your debts, you focus hard on paying off the debt with the highest interest rate first, proceeding on down your list until everything is repaid. The only thing that changes over time is the amount you pay toward the debt at the top of your list.