Debt Payoff Example
Debt Avalanche Method — Step-by-Step Example
See how the avalanche method minimizes total interest using the same 3-debt scenario.
Scenario
Same 3 debts as snowball example. Extra $300/month. Attack highest rate first.
Inputs
Debt 1 (highest rate)$2,000 at 18%
Debt 2$8,000 at 14%
Debt 3 (lowest rate)$15,000 at 10%
Results
Debt 1 cleared first~7 months (same as snowball)
Total interest paid~$5,600
vs. Snowball savings~$1,200 less interest
Total payoff time~51 months
Explanation
Avalanche also clears Debt 1 first (it's both smallest and highest rate here). The key difference appears when rates diverge more. Avalanche always minimizes total interest — it's the mathematically optimal strategy.
Key Takeaways
- If the smallest debt is NOT the highest rate, avalanche and snowball diverge more.
- Automate minimum payments on all debts, direct all extra to the target debt.