What Is Debt Avalanche? Meaning & Example
Definition
The debt avalanche method pays minimums on all debts and puts extra money toward the debt with the highest interest rate first. It typically saves the most interest.
Related terms
The debt snowball method pays minimums on all debts and puts extra money toward the smallest balance first. Quick wins can help build motivation.
APR (Annual Percentage Rate)APR is the yearly cost of borrowing, including interest and certain fees, shown as a percentage. It helps compare loans and credit cards.
BudgetA budget is a plan for how you will spend, save and invest your income. It helps you direct money toward your priorities instead of wondering where it went.
What is Debt Avalanche?
The debt avalanche method pays minimums on all debts and puts extra money toward the debt with the highest interest rate first. It typically saves the most interest.
Can you give an example of Debt Avalanche?
With card balances at 25% and 18% APR, the avalanche targets the 25% card first.