How To Get Out Of Debt On Your Own Using The Debt Avalanche Method

The debt avalanche method is a highly effective method used to get rid of debt. It’s basically the alternative from the debt snowball method. It's effective because it straight to the point and it prioritizes paying down the debts that have the highest interest rates first. It’s called the avalanche method because like the falling of an avalanche it’s supposed to be quick and to the point. With this strategy your ripping off the Band-Aid as quick as you can and throwing every ounce of savings you have paying off this toxic debt.

In this blog post we'll play out a visual scenario of how to eliminate all your debt using the Debt Avalanche method. We'll go the payoff month by month to show just how easy it is to follow along and use this option.

In the example below, we have 3 credit card accounts with three different credit card companies.

There's a Chase account which has a balance of $7,500 with an APR of 18%. The Chase has a minimum payment due of $200.

There's a Citi account which has a balance of $10,000 with an APR of 21%. The Citi account has a minimum payment due of $300.

The Bank of America account has a balance of $12,500 with an APR of 24%. The Bank of America account has a minimum payment due of $400.

In this scenario we should pay off the accounts with the lowest APR first because that's the strategy the debt avalanche method calls for.

So, the order for pay down will be as follows: The Citibank account will be paid off first, the Chase account will be paid off second and the Bank of America account will be paid off last.

Our total minimum payments due come out to $900 a month if we assume we have a budget of $1,500 monthly we will have a leftover of $600 monthly to allocate towards more aggressively paying down the other accounts in our debt avalanche method.

Month 1 – Minimum payments due $900. $1,500 budget. $600 leftover. The $600 leftover will be applied to The Chase account with a balance of $7,500 so at the end of the first month your balance will be $6,900.

Month 2 – Minimum payments due $900. $1,500 budget. $600 leftover. The $600 leftover will be applied to The Chase account with a balance of $7,500 so at the end of the second month your balance will be $6,300.

Month 3 – Minimum payments due $900. $1,500 budget. $600 leftover. The $600 leftover will be applied to the Chase account with a balance of $6,300 and the end balance will be $5,700.

Month 4 - Minimum payments due $900. $1,500 budget. $600 leftover. The $600 leftover will be applied to the Chase account with a balance of $6,300 and an ending balance of $5,100.

Month 5 - Minimum payments due $900. $1,500 budget. $600 leftover. The $600 leftover will be applied to the Chase account with a balance of $5,100 and an ending balance of $4,500.

Month 6 – Minimum payments due $900. $1,500 budget. $600 leftover. The $600 leftover will be applied to the Chase account with a balance of $4,500 and an ending balance of $3,900.

Month 7 – Minimum payments due $900. $1,500 budget. $600 leftover. The $600 leftover will be applied to the Chase account with a balance of $3,900 and an ending balance of $3,300.

Month 8 – Minimum payments due $900. $1,500 budget. $600 leftover. The $600 leftover will be applied to the Chase account with a balance of $3,300 and an ending balance of $2,700.

Month 9 – Minimum payments due $900. $1,500 budget. $600 leftover. The $600 leftover will be applied to the Chase account with a balance of $2,700 and an ending balance of $2,100.

Month 10 – Minimum payments due $900. $1,500 budget. $600 leftover. The $600 leftover will be applied to the Chase account with a balance of $2,100 and an ending balance of $1,500.

Month 11 – Minimum payments due $900. $1,500 budget. $600 leftover. The $600 leftover will be applied to the Chase account with a balance of $1,500 and an ending balance of $900.

Month 12 – Minimum payments due $900. $1,500 budget. $600 leftover. The $600 leftover will be applied to the Chase account with a balance of $900 and an ending balance of $300.

Month 13 – Minimum payments due $900. $1,500 budget. $600 leftover. $300 will be applied to the Chase account with a balance of a $300 and the remaining $300 leftover will be applied to the next account which is the Citi bank account with a balance of $12,500.

Since the Chase account now has a completely zeroed out balance our monthly liability on minimum payments due has decreased. Due to this our new minimum payment amount due is now only $700.

Month 14 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 of the extra funds should be applied to the Citi bank account. $11,700 is the remaining balance on the Citibank account.

Month 15 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 of the extra funds should be applied to the Citi bank account with a balance of $11,700. The remaining balance will go to $10,900.

Month 16 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 of the extra funds should be applied to the Citi bank account with a balance of $10,900. The remaining balance will go to $10,100.

Month 17 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 of the extra funds should be applied to the Citi bank account with a balance of $10,100. The remaining balance decreases to $9,300.

Month 18 - Minimum payments due $700. $1,500 budget. $800 leftover. $800 of the extra funds should be applied to the Citi bank account with a balance of $9,300. The remaining balance decreases to $8,500.

Month 19 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 of the extra funds should be applied to the Citi bank account with a balance of $8,500. The remaining balance decreases to $7,700.

Month 20 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 of the extra funds should be applied to the Citi bank account with a balance of $7,700. The remaining balance of $6,900.

Month 21 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 of the extra funds should be applied to the Citi bank account with a balance of $6,900. The remaining balance goes to $6,100.

Month 22 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 of the extra funds should be applied to the Citi bank account with a balance of $6,100. The remaining balance goes to $5,300.

Month 23 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 of the extra funds should be applied to the Citi bank account with a balance of $5,300. The remaining balance goes to $4,500.

Month 24 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 of the extra funds should be applied to the Citi bank account with a balance of $4,500. The remaining balance will drop to $3,700.

Month 25 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 of the extra funds should be applied to the Citi bank account with a balance of $3,700. The remaining balance will drop to $2,900.

Month 26 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 of the extra funds should be applied to the Citi bank account with a balance of $2,900. The remaining balance will drop to $2,100.

Month 27 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 of the extra funds should be applied to the Citi bank account with a balance of $2,100. The remaining balance will drop to $1,300.

Month 28 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 of the extra funds should be applied to the Citi bank account with a balance of $1,300. The remaining balance will fall to $500.

Month 29 – Minimum payments due $700. $1,500 budget. $800 leftover. $500 will be applied to the Citi bank account which will pay it off in its entirety and $300 will be applied to the bank of America account with a balance of $12,500. The remaining balance will fall to $12,300.

Month 30 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 will be applied to the Bank of America account with a balance of $12,300. The remaining balance will fall to $11,500.

Month 31 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 will be applied to the Bank of America account with a balance of $11,500 bringing the account balance down to $10,700.

Month 32 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 will be applied to the Bank of America account with a balance of $10,700 bringing the account balance down to $9,990.

Month 33 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 will be applied to the Bank of America with a balance of $9,990 and the newly reduced total will drop to $9,100.

Month 34 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 will be applied to the Bank of America account with a balance of $9,100 and the newly reduced total will drop to $8,300.

Month 35 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 will be applied to the Bank of America account with a balance of $8,300. The newly reduced balance will drop down to $7,500.

Month 36 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 will be applied to the Bank of America account with a balance of $7,500. The newly reduced balance will drop down to $6,700.

Month 37 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 will be applied to the Bank of America account with a balance of $6,700. The newly reduced balance will drop down to $5,900.

Month 38 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 will be applied to the Bank of America account with a balance of $5,900. The newly reduced balance will drop down to $5,100.

Month 39 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 will be applied to the Bank of America account with a balance of $5,900. The newly reduced balance will drop down to $4,300.

Month 40 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 will be applied to the Bank of America account with a balance of $4,300. The newly reduced balance will drop to $3,500.

Month 41 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 will be applied to the Bank of America account with a balance of $3,500. The newly reduced balance will drop to $2,700.

Month 42 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 will be applied to the Bank of America account with a balance of $2,700. The newly reduced balance will drop to $1,900.

Month 43 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 will be applied to the Bank of America account with a balance of $1,900. The newly reduced balance will drop to $1,100.

Month 44 – Minimum payments due $700. $1,500 budget. $800 leftover. $800 will be applied to the Bank of America account with a balance of $1,900. The newly reduced balance will drop to $300.

Month 45 – Minimum payments due $700. $1,500 budget. $800 leftover. $300 will be applied to the Bank of America account bringing the balance to $0.

After 45 months of following this debt avalanche guide all subsequent debts will have been paid down in their entirety. In this scenario, our calculations are based on balances remaining mostly constant regardless if a minimum payment is paid or not. Although this might not seem accurate, it is typically quite similar to a real life scenario in which minimal credit card usage can outweigh the impact of minimum payments.

Which method of eliminating debt is best for you is really dependent on the number of accounts you have and your allotted monthly budget.

If you have a larger budget and only a few accounts, the debt avalanche method could prove highly effective in helping you eliminate your debt, however this really depends on your specific scenario and preference.

The debt avalanche method is most effective for getting rid of high interest rate accounts first and it was created for that exact purpose. Having discipline is also important when utilizing this option.

Some people really swear by this option since they understand that if they play their cards right and all goes well it well help them get out of debt while making sure they get rid of the highest interest rate accounts first.