The Debt Avalanche Method in Australia: Minimising Interest Costs
The debt avalanche method pays off debts from highest interest rate to lowest, regardless of balance. It minimises total interest paid and is the mathematically optimal repayment strategy.
2 min read · Updated June 2026
Make minimum payments on all debts, then direct every spare dollar toward the highest-rate debt. Once eliminated, that payment rolls to the next highest rate. For Australians, this typically means targeting credit cards (18-22%) first, then personal loans (8-14%), then car loans (5-9%), before any investment loans.
The savings can be significant. An Australian with $5,000 on a credit card at 20%, $12,000 car loan at 8%, and $25,000 personal loan at 10% will save hundreds to thousands of dollars in interest with avalanche compared to snowball — depending on how much extra they can allocate to repayments each month.
The challenge: if your highest-interest debt also has a large balance, it may take many months before you eliminate it. This can be psychologically challenging — paying $500 extra per month on a $15,000 credit card debt means 12+ months before the first payoff victory.
Note that HECS-HELP debt should generally be left alone in any debt repayment strategy. It carries no real interest (only CPI indexation), has income-contingent repayments, and is forgiven upon death. Directing extra money toward HECS instead of a 20% credit card is almost always the wrong priority.
Many Australian financial educators recommend a hybrid approach: use snowball to eliminate one or two small debts quickly (that Afterpay balance, the small personal loan) for momentum, then switch to avalanche for the remaining larger balances.
Richify models the exact interest savings of avalanche versus snowball across your specific debts — including showing why HECS should typically be left on autopilot.
