How to determine which debt payoff method to use

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Debt Snowball Method

The debt snowball method for paying off debt is focused on paying off smaller debt balances first. After a smaller debt is paid off the payments are then applied to the next smallest debt balance and so forth. Think of your payment to one card increasing (like a snowball growing larger as more snow is compacted) each time you’ve paid off a balance. Learn more about the debt snowball method.

The idea is that your momentum will increase as you see one credit card or loan paid off after another regardless of interest rates. The feeling of accomplishment after paying off one debt will lead you to pay off another.

Debt Avalanche Method

The debt avalanche method is essentially the same except the focus is paying off the debt with the highest interest first. Once you’ve paid the highest interest you move onto the second highest interest and continue to move down the list until all debt has been paid. You also use all prior payments from paid off debt to the next debt essentially creating an avalanche. Learn more about the debt avalanche method.

Which method is better?

It all really depends on what motivates you to pay off your debt sooner rather than later. The avalanche method, however, will save you more on interest payments in the long run.

What’s more important is figuring out your own personal motivations to choose the right approach for you to become debt free.


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