Debt can be a crushing burden to carry and many Americans on average have a whopping $92,727 of debt from things like credit cards, car loans, student loans, and personal loans. Knowing a good strategy for getting rid of your debt can keep you on track and push you toward a better financial future. There are two main methods for paying off debt: the debt snowball and the debt avalanche. While these terms may seem silly, they have effectively helped thousands of people dig themselves out of extreme debt. Let’s look at each method.
Debt Snowball The debt snowball takes the approach of aggressively paying of your smallest debt first (while still paying minimums on your other debts) and then rolling that money you freed up from paying off the first debt into the next. This method works for a lot of people because it’s easier to see and feel progress when you can remove the small stuff quickly and easily. Debt Avalanche The debt avalanche method focuses on paying off the debt with the largest interest rates first (while still paying minimums on your other debts). These debts are often the bigger lump sums of money you owe from things like car loans or student loans. This approach potentially will help you save more money and pay off debts quicker. Which method you choose will depend on you and your mindset. The biggest deciding factor will be the one keeps you on track and motivated to continue because paying off debt takes time, sacrifice, and discipline.
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