EuroCalc

What is Debt Avalanche Method?

The debt avalanche method is a debt-repayment strategy in which the borrower pays minimums on every debt and channels all extra funds to the highest-interest-rate balance first, regardless of size.

The avalanche is mathematically optimal — it minimises total interest paid and shortens the payoff timeline. For borrowers who can stick with a long-term plan without early wins, it is the rational choice.

The downside is motivational: a large high-rate balance may take many months to disappear, with no visible progress. Pairing the method with a clear payoff calendar and milestones helps maintain commitment.

Example

Same example: CHF 15k at 18% is attacked first; once cleared, payments roll to CHF 2k at 12%, then CHF 8k at 6%. Total interest is lower than the snowball path.

Related terms

Debt Snowball Method

The debt snowball method is a debt-repayment strategy in which the borrower pays minimums on every debt and channels all extra funds to the smallest balance first, then rolls each freed payment into the next-smallest balance.

Credit Score

A credit score is a numerical rating — typically 300 to 850 in the US — that summarises a borrower's creditworthiness based on credit history, used by lenders to decide loan approval and pricing.

Budget

A budget is a written plan that allocates expected income to spending, saving and debt repayment categories over a defined period, used to control finances and reach goals.

Credit Utilisation

Credit utilisation is the percentage of available credit on revolving accounts (credit cards, lines of credit) that is currently being used — a major component of credit scores, with lower being better.

Frequently asked questions

How much do I save vs snowball?+

Usually a few hundred to a few thousand francs in interest, depending on rates and balances.

What if my biggest debt has the lowest rate?+

Avalanche still tackles the highest-rate debt first, even if it is smaller.

Can I combine methods?+

Yes — clear one tiny balance first for a quick win, then switch to pure avalanche.