The Debt Avalanche Method in Australia: Minimising Interest Costs

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.