Harder and slower

What is the debt avalanche?

As the name suggests, debt avalanche refers to debt repayment that prioritises the one with the highest interest rate and paying minimum for the rest. So list your debt with the highest interest rate first and with the lowest interest rate last.

Once you’re done paying off the highest interest debt, attack the next one. Repeat the process until you’re debt-free.

Does it work?

If we’re talking about maths, yes, it does. This method does not take into account the balances on your card, only the interest rates. So if you already have the discipline to pay off debt and have the cash for it, this will also work for you. For revolvers, we don’t recommend this approach as it’s mostly a person’s mindset and spending habits that led them to being a revolver.

Of the two, debt snowball is more effective, according to research.

How to succeed in your debt avalanche:

■ Apply the same principles listed in the debt snowball.

The challenge with this method is keeping momentum. Paying off the highest interest rate debt might be daunting and you won’t have the small victories you’d have when you’re doing the snowball. So to keep you motivated, think of how much money you can save by ditching that high-interest debt. That’s your reward.