The Avalanche Method: High-Interest Debt Destruction

In Latin America, interest rates are unforgiving. While in Europe a credit card charges 15%, in countries like Colombia, Mexico, or Brazil, rates can exceed 40%, 60%, or even 100% annually.

Given this scenario, traditional financial advice to "pay off the smallest debt first to motivate yourself" (Snowball) is dangerous.

The Problem: Snowball vs. Math

The "Snowball" method tells you to pay the smallest debt first to feel good.

The "Avalanche" method tells you to pay the debt with the highest interest rate first, regardless of the balance.

The Agitation: The Cost of Emotion

Imagine you have: A) Credit Card: $1,000 USD at 50% interest.

B) Family Loan: $500 USD at 0% interest.

If you use your money to pay the family member first (because it is smaller and easier), the Credit Card continues to charge you a brutal 50% on the $1,000. You are bleeding financially for a psychological victory.

In high-rate environments, math must beat emotion.

The Solution: Sort by "Pain"

1. Make a list of all your debts.
2. Sort them by Interest Rate (APR/EAR) from highest to lowest.
3. Pay the minimum on all of them, except the first one.
4. Attack the first one with all your available money until it is destroyed.

This is the Avalanche. By eliminating the highest interest, you reduce the "average cost" of your total debt faster.

📱 The Simulation on Amorti

Although AmortiApp is for mortgages, the logic is identical.

1. Use the calculator to simulate your credit card debt as if it were a loan.
2. Put the rate at 40% or 50%.
3. Look at the interest column.
4. Now simulate the car debt at 15%.

You will see that $1,000 on the card generates 3 times more interest than $1,000 on the car. Every dollar you use to pay the card saves you triple.

Be cold. Be calculating. Use the Avalanche.

Destroy your most expensive debt today.

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