Case Study: 'Sarah' Saved £1,400 with Avalanche
Hypothetical case study showing how prioritizing high-interest debts saved £1,400 in interest and cleared debt 11 months faster.
To understand how strategy selection affects total interest paid, examining a step-by-step hypothetical case study provides clear visual clarity.
In this educational breakdown, we follow a fictional persona named "Sarah" who has three separate debt accounts and a fixed monthly extra budget of £200. We compare how her payoff timeline and interest totals change under minimum payments vs. the Debt Avalanche method.
1. Sarah's Initial Debt Portfolio
Here is Sarah's hypothetical debt profile at the start of her repayment plan:
- Account A (Store Card): £1,200 balance @ 29.9% APR (Minimum payment: £40/mo)
- Account B (Credit Card): £4,500 balance @ 19.9% APR (Minimum payment: £110/mo)
- Account C (Overdraft / Personal Loan): £2,800 balance @ 12.5% APR (Minimum payment: £70/mo)
- Total Debt Balance: £8,500
- Required Minimum Payments: £220 / month
- Extra Budget Available: £200 / month
- Total Monthly Payment Budget: £420 / month
2. Comparing Repayment Schedules
Let's look at the mathematical outcome across three different execution strategies:
| Strategy | Monthly Payment | Time to £0 Balance | Total Interest Paid | Interest Saved |
|---|---|---|---|---|
| Minimum Payments Only | £220 (declining) | 12 Years, 2 Months | £4,120 | £0 (Baseline) |
| Debt Snowball Method | £420 fixed | 2 Years, 3 Months | £1,580 | £2,540 |
| Debt Avalanche Method | £420 fixed | 1 Year, 11 Months | £1,180 | £2,940 |
Hypothetical figures based on constant APRs and no new balance additions.
3. The Step-by-Step Avalanche Timeline
Here is how Sarah's payments shifted over time under the Debt Avalanche Method:
Phase 1: Target Account A (Store Card at 29.9% APR)
- Monthly Allocation: £40 (min) + £200 (extra) = £240/month directed at Account A.
- Accounts B and C receive their standard minimums (£110 and £70).
- Result: Account A is completely cleared in Month 6.
Phase 2: Target Account B (Credit Card at 19.9% APR)
- With Account A cleared, the entire £240 payment rolls into Account B.
- Monthly Allocation: £110 (Account B min) + £240 (rolled payment) = £350/month directed at Account B.
- Account C continues receiving its minimum (£70).
- Result: Account B is completely cleared in Month 16.
Phase 3: Target Account C (Personal Loan at 12.5% APR)
- With Accounts A & B cleared, all payment power rolls into Account C.
- Monthly Allocation: £70 (min) + £350 (rolled payment) = £420/month directed at Account C.
- Result: Account C is completely cleared in Month 23.
4. Key Takeaways from the Numbers
- Avalanche vs. Snowball: In Sarah's case, prioritizing the 29.9% APR store card first saved £400 more in interest than the snowball order and finished 4 months faster.
- Avalanche vs. Minimums: Compared to paying only minimums, adding £200/month shaved over 10 years off her timeline and saved nearly £3,000 in compound interest.
- The Rollover Effect: The monthly payment budget stayed static at £420, but its impact accelerated dramatically as accounts were eliminated one by one.
Financial Disclaimer: Content on debtclear.me is provided for educational and informational purposes only and should not be construed as professional financial, legal, or tax advice. The calculations and scenarios presented are estimates based on user inputs and mathematical formulas. For personalized advice tailored to your specific financial situation, please consult a qualified financial advisor or certified credit counselor.
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