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How to pay off your loans using the 'debt avalanche' method

“Dear Debt” author Melanie Lockert says this method helped her repay $68,000 in student loans in under five years — and save money in the process.
Image: Credit cards
Using the debt avalanche method, you will pay the minimum on each debt but will focus on paying off the credit card debt first with any extra money you have.Elise Amendola / AP file

If you’re stuck under an avalanche of debt, you might think the easiest solution is to pay the minimum on your balances each month. But you can pay it off faster and save money in the process by putting as much money as possible towards your high-interest debt first.

Melanie Lockert, author of "Dear Debt: A Story About Breaking Up with Debt"
Melanie Lockert, author of "Dear Debt: A Story About Breaking Up with Debt" Jim Gion

The popular debt repayment method, known as “the debt avalanche,” helped “Dear Debt” author Melanie Lockert pay off $68,000 in student loans and save money in the process.

“You typically save money because you’re focusing on the highest interest,” Lockert tells NBC News BETTER.

The debt avalanche is an alternative to the “wealth snowball method,” where you focus on paying more than what’s owed on your minimum monthly balance, says Lockert.

How it works

Let’s say you have multiple loans with different balances and interest rates. For example, you might have $5,000 in credit card debt at 16.29 percent, a $11,000 car loan at 3.7 percent, and $60,000 in student loans at 4.2 percent.

Using the debt avalanche method, you will pay the minimum on each debt but will focus on paying off the credit card debt first with any extra money you have.

For instance, if your minimum monthly payment on the credit card is $300, instead of just paying the minimum, contribute $320. The more you can afford to contribute, the better.

After you pay that off, focus on the student loan debt next, followed by the car loan.

Lockert says the 7.9 percent interest rate carried on her student loan was her biggest motivation for embracing the debt avalanche.

“I did the math, and my interest was costing about $11 per day, and that just drove me completely mad and upset me because $11 a day, that’s $300 a month,” says Lockert.

Save as much money as possible

There is no easy solution for paying off debt, according to Lockert, who has learned from experience. Shortly after gradating from New York University in 2011, she moved to Portland, Oregon, where the cost of living was significantly less than New York City, but where she struggled to find work.

Lockert eventually landed a job at a non-profit that netted her $31,000 a year. She started doing side hustles, she recalls, often working seven days a week.

“I pretty much cut back every single way I could,” says Lockert. “I didn’t have health insurance, I didn’t have a car, no pets. I walked and biked everywhere and took every gig I could take. And after cutting back pretty much all the expenses I could, I hit a plateau and realized I can’t cut back anymore, and so I started side hustling as much as I could and earning more money.”

The millennial found side gigs on Craigslist and TaskRabbit, and made extra money pet sitting.

“Every time I got paid from a side hustle I put that money towards my debt. That helped lower the interest,” she says.

Lockert eventually launched her own freelance writing business, which doubled her income. At the time, her studio in Portland, which she shared which her then boyfriend, cost her just $400 a month. The extra money coupled with a low cost of living allowed her to pay off her high interest debt in under five years.

“Once I got rid of those 7.9 interest loans, I just felt so great,” Lockert recalls.

When she was finished paying off her high-interest student loans, she could focus on paying off her next highest interest debts, she says.

“Then, towards the end of it, I was just down to my undergrad loans of 2.3 percent, and just focused on that,” she says. “And obviously those payments went a lot further at that point because the interest was so low, and then I could make more principal headway on the payments.”

There’s no fun advice. There’s no easy hack. There’s no magic secret. It’s really just about being consistent.

Change your mindset

The writer says the best way to pay off debt is to be consistent.

“There’s no fun advice,” Lockert says. “There’s no easy hack. There’s no magic secret. It’s really just about being consistent.”

Lockert says the first step to tackling those high-interest loans is to change your mindset about debt.

“I know that sounds weird, but I had so many excuses on why I couldn’t get out of debt,” she says.

She says she convinced herself that her situation was normal and that everyone has debt.

“When you start thinking that, then of course you’re not going to really focus on paying off debt,” she says.

Lockert eventually realized there is no such thing as “good debt,” she says, and began the hard work of paying it off as fast as she could.

“So, really, I had to just change my mindset,” Lockert says.

Set milestones and have fun

Paying off large amounts of debt can be stressful, warns Lockert. That’s why it’s important to set milestones for having fun and staying motivated.

For example, for every $1,000 in high-interest debt you pay off, treat yourself to a nice dinner, advises Lockert. For every $10,000 paid, take a fun day trip, she says.

“Debt fatigue is real,” Lockert says, “and so for that I definitely recommend budgeting for some self care and some fun and some milestones.”

How to tackle debt with the “debt avalanche method”

  • How to do it: Let’s say you have three loans with different interest rates. Focus on contributing as much money as possible to the highest interest rate loan first while paying the minimum monthly balances on your other debt. When the highest-interest loan is paid, focus on paying off your next highest interest debt.
  • Save as much money as possible: Focus on reducing your cost of living, if possible. Cut back on unnecessary expenses and look into side gigs that can earn you extra income. Put your extra savings towards paying off your high-interest debt.
  • Change how you think: When you’re buried in debt, it’s easyto make excuses, or to convince yourself that paying off your loans is impossible. The key is to have a plan and stick to it consistently.
  • Remember to have fun: Paying off large sums of debt can be stressful and exhausting. To prevent burn out, set milestones that will allow you to have fun and stay motivated. For instance, for every $1,000 of debt paid off, treat yourself to something enjoyable.


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