In this article
The avalanche method: reduce your debt
Learn how to tackle your debt using the avalanche method. Help reduce your debt and manage your finances.
In this article
If thinking about debt feels overwhelming, the avalanche can help you feel more in control.
The avalanche method is a debt reduction strategy that involves paying off debts with the highest interest rates first. This means that you'll focus on paying off the debt with the highest interest rate while making minimum payments on your other debts. Once you've paid off the first debt, you'll move on to the next highest interest rate debt and so on until all your debts are paid off.
There are a few steps to it.
Step 1
Make a list of your debts– including the balance owed, the interest rate, and the minimum monthly payment.
Order your debts by interest rate. The debt with the highest interest rate should be at the top of the list.
Head to your report to see your loans, credit cards, and current accounts all in one place.
Step 2
Focus on paying off the debt with the highest interest rate, while making minimum payments on all your other debts.
To do this, you'll need to work out what you can afford to pay towards the debt. That might mean cutting back on expenses or negotiating with lenders for a lower interest rate.
Step 3
Once you've paid off the first debt, move on to the next highest interest rate debt and repeat the process until all your debts are paid off.
Check your report to see when your credit cards or loans have been closed.
- You can save money on interest. By focusing on paying off debts with the highest interest rates first, you'll save money on interest in the long run.
- Feel more motivated. As you work your way through the debt, you’ll feel less overwhelmed and more in control.
- It might take longer to pay off all debts. Depending on the size of your debts and interest rates, the avalanche method may take longer to pay off all your debts than other methods.
- It might not work for everyone. The avalanche method may not work for everyone - you could try something like the snowball method instead.
The avalanche method is a powerful tool for reducing debt and taking control of your finances. While it may not be the right method for everyone, it's definitely worth considering if you're feeling overwhelmed by your debt. Remember, reducing debt takes time and effort, but with the right strategy and mindset, you can move forward.
If you need help making a budget, try out StepChange’s guide. StepChange helps people with debt every day. Find out how they can help with your debt in just a few minutes. Take the money health check online.
Written by Helen Tippell
Digital Copywriter
Helen's our resident Digital Copywriter. She makes personal finance easier to understand so you can be confident about your credit choices.