Create a snow storm and start to manage your debt!

The debt avalanche method is a way to pay down debt by getting rid of your balance with the highest interest rate first.

With this payoff strategy, you make minimum monthly payments on all your debts but pay extra toward your debt with the highest interest rate until it’s gone. You then apply your minimum payment from the eliminated debt plus more, if you can spare it, to the balance that carries the nexthighest rate, and so on.

Compared with other debt paydown strategies, the debt avalanche method has the potential to save you the most money by limiting costly interest charges. Here’s how to make it work for you.

How the Debt Avalanche Method Works. The debt avalanche method eliminates your most expensive debts first, earning you returns on your money more quickly.

Think of it this way: Say you have a student loan that carries a 6.8% interest rate annually.

When you pay it off, your budget earns back the equivalent of that interest since you’re no longer making payments on the debt. Loans and credit cards generally collect interest on top of the principal balance you’ve borrowed, or on top of the credit card charges you’ve made, as a fee for borrowing money. Taking on debt can end up being far more expensive than you initially planned, largely because of compound interest.

That means that as interest is added to your debt, further charges are calculated based on the new, larger total. Your minimum payment might not be enough to cover all the interest that’s accumulated over time.

When you get rid of debts using the debt avalanche method, you stop the growth of compound interest and save the most in interest by attacking those debts with the highest interest first.

Is the Debt Avalanche Better Than the Debt Snowball Method? The debt snowball method is an alternative that can give you the opportunity to feel successful faster. This strategy recommends paying off your smallest balance first, no matter the interest rate. You won’t see the same interest savings over time, but experiencing a quicker victory early could keep you going, and ensure you make it to the end of your debt payoff journey.

An even bigger drawback of the debt snowball, though, is that you’ll save less money. That makes the debt avalanche method a superior strategy in most cases.

A Strategy That Gives You Control. Perhaps the biggest upside to using a method like the debt avalanche is that it puts you in more control of your finances. When you make a plan, you’ll familiarize yourself with the ideas of minimum payments, interest rates or payoff timelines. You’ll do the work to gain an understanding of your debt, which is nearly as useful as making the payments to get rid of it.