GLOSSARY · DEBT & HOUSING
Debt avalanche
A payoff order that pays the minimum on every debt and sends all extra money to the debt with the highest interest rate, then rolls that payment to the next-highest rate once the first is cleared. For a fixed monthly budget it gives the lowest total interest and usually the earliest debt-free date.
Also called: avalanche method, highest interest first
COMPUTE IT WITH YOUR NUMBERS
LEARN IT PROPERLY
CHAPTER · UNDERSTANDING YOUR DEBT · FOUNDATIONSAvalanche or Snowball: Choosing a Payoff OrderCHAPTER · DEBT ELIMINATION STRATEGIES · STRATEGIESA Debt Payoff RoadmapRELATED TERMS
SOURCES
- Winning the Battle but Losing the War: The Psychology of Debt Management. Amar, Ariely, Ayal, Cryder & Rick, Journal of Marketing Research, 2011.
- Can Small Victories Help Win the War? Evidence from Consumer Debt Management. Gal and McShane, Journal of Marketing Research, 2012.