Q: Today’s question comes from Chris. She writes: “What’s the ‘avalanche’ method for paying off debt?”
A: When it comes to tackling debt, you’ve got options – and the avalanche method is one of the most effective. It’s designed to get you out of debt faster and for less money overall.
Here’s how it works: You pay off the debt with the highest interest rate first. This minimizes the total interest you’ll pay over time, since you’re knocking out the most expensive debt first.
With the avalanche method, you’ll continue to make the minimum payments on all your debts, but any extra cash goes straight to the highest-interest one. Once that’s paid off, move on to the next debt with the next highest interest, and put extra cash toward it until you’ve reached a $0 balance. Keep repeating the process until you’re completely debt-free.