Choosing the Right Debt Payoff Strategy
When it comes to paying off multiple debts, two strategies stand out: the Debt Snowball and the Debt Avalanche. Both methods require you to make minimum payments on all debts while putting any extra cash toward a single debt at a time.
The Debt Snowball Method
The Debt Snowball method focuses on paying off debts from smallest balance to largest balance, regardless of interest rate. This approach is built on psychological wins—by clearing small debts quickly, you gain the momentum and motivation to tackle larger ones.
The Debt Avalanche Method
The Debt Avalanche method prioritizes debts with the highest interest rates first. Mathematically, this is the most efficient way to pay off debt because it minimizes the total amount of interest you'll pay over time and may help you become debt-free sooner.
Which One Is Right for You?
If you need quick wins to stay motivated, the Snowball method might be your best bet. If you want to save the most money on interest, the Avalanche method is the clear winner. Use this calculator to see the exact difference for your specific situation.