Debt avalanche

The debt avalanche means paying the minimum on everything, then putting every spare rupee on your highest-interest debt first. Because the costliest debt grows fastest, clearing it first saves you the most money overall.

How it works

List every debt with its interest rate. Keep paying at least the minimum due on all of them so none goes overdue, then throw every extra rupee at the one with the highest rate. When that is cleared, roll the whole amount you were paying on it onto the next-highest, and so on. The high-rate debts, usually credit card balances at around 3.5% a month, are attacked first because they are the ones quietly costing you the most.

Why it saves the most

Interest is the enemy, and interest is highest on the costliest debt. By killing the highest rate first, you cut the biggest source of interest soonest, so you pay less in total and get out of debt faster in money terms than with any other order. On paper, the avalanche is the mathematically cheapest way to clear multiple debts.

Avalanche versus snowball

The trade-off is motivation. The avalanche saves the most money, but the first debt can take a while to clear, which some people find discouraging. The debt snowball, which clears the smallest balance first, costs a little more interest but delivers quick wins. The best method is the one you will actually stick to. See how to get out of credit card debt.