Two proven ways to pay off several debts. One saves more money, the other gives you a win sooner.
The two methods
With both, you pay the minimum on every debt and send any extra money to one target. The only difference is which target.
- Avalanche: extra money goes to the highest interest rate first.
- Snowball: extra money goes to the smallest balance first.
A real comparison
Three debts: a $4,200 card at 27%, a $900 card at 19%, and a $6,500 loan at 9%. Minimums plus $100 extra each month.
Example numbers. Your balances and rates will change the result.
Which one should you pick?
If you're disciplined and want the lowest cost, use avalanche. If you've tried before and lost steam, use snowball: paying off a whole debt in month 8 is a real reason to keep going. The best method is the one you'll actually stick with.
The biggest win isn't the method. It's making extra payments consistently, every month.
This tip is general education, not financial advice. Examples are illustrative; your balances, rates and card terms will change the numbers.