Pick the Best Debt Reduction Style for You

Decide the best debt reduction strategy for your needs and personality.

Please check out our Organizing Your Debt page before reading this / watching this video.

If you’ve done, that get out your debt organizational chart.

Making a debt reduction plan and moving forward with it will help you focus productive energy toward your debt, not just stress.

There are many options for debt reduction. What’s important is finding the right one for you and sticking with it.

We’ll focus on two main options today – the debt snowball method and the debt avalanche method.

Debt Avalanche Method

This is considered the cheapest and most efficient option. You take the list of debts you have and tackle the debt with the highest interest rate first.

You make the minimum payment on all debts, but pay as much as you can on the credit card with the highest interest rate.

Use your budgeting work to determine how much money you have to spend on debt payments. Pay all the minimum payments and use anything extra to attack the debt with the highest interest rate.

This method will likely take you some time to pay off that first debt. When that’s done, celebrate the victory and move on to the card with the second highest interest rate.

The Debt Avalanche Method may take time to zero out your first debt, so celebrating the personal victory is important.

The downside of this method is that it can take a lot of time to pay off the first debt, so it’s easy for people to get distracted or discouraged.

If you think that’s likely to be you, the Debt Snowball Method may be a better choice.

Debt Snowball Method

Instead of sorting your debts by interest rate, you sort them by size, from smallest to largest. Pay the minimum balance on all your debts except the smallest one.

Pay off the smallest first, using the money you have allotted toward debt in your budget. Then move on to the second smallest amount.

It’s not the most efficient option, but a lot of people argue that it helps you stay on track, with regular victories and steps toward your ultimate goal.

You’ll get a victory really quickly. The debt will be gone, and you can even discontinue using that card if you want. The idea with this method is really to keep up the motivation for paying off debt. The debts disappear like snowballs get bigger, so you have a real sense of winning and progress.

Choose whichever you think will work best for you. It’s really a personal choice. But the most important thing is picking a strategy and moving forward with it.

To figure out how long it will take you to pay off your current debt with your current or goal payments, check out this debt payoff calculator.

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