Definition
Debt Avalanche
The debt avalanche is a repayment strategy where you attack the debt with the highest interest rate first, while paying minimums on the others, to minimise total interest paid.
By prioritising the costliest debt — typically credit cards and personal loans in India — the avalanche method saves the most money and clears your debts fastest in interest terms. Once the highest-rate debt is gone, you redirect that payment to the next-highest, and so on.
The downside is motivation: the largest, costliest debt may also be slow to clear, so early wins are scarce compared with the debt snowball. The avalanche is the rational, lowest-cost choice for those who can stay disciplined without frequent psychological rewards; many people blend the two approaches.
Related terms
- Debt SnowballThe debt snowball is a repayment strategy where you clear your smallest debt first while paying minimums on the rest, then roll that payment into the next-smallest debt, and so on.
- Balance TransferA balance transfer moves an outstanding credit-card or loan balance to another card or lender offering a lower (sometimes zero) introductory interest rate for a limited period.
- Minimum-Due TrapThe minimum-due trap is the costly habit of paying only the small 'minimum amount due' on a credit-card bill, which keeps you in debt and accrues heavy interest on the rest.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.