Charlie MarlowMany people ask me what the best method for paying off debt is. I tell them that there are two popular and effective methods, the Debt Snowball and the Debt Avalanche methods.
The difference between the two methods is the order that the bills are paid. The Debt Snowball requires you to pay off the lowest balance to the largest balance without regard to the interest rate. This gives you a psychological advantage as you are getting quick wins over the smaller debts and can pay off a number of debts sooner. This method works well if you have a number of debts and need encouragement and discipline.
The Debt Avalanche method focuses on paying the debt with the highest to the lowest interest rate, regardless of the balance of each debt. This method will save you more on interest charges and should take less time to pay off your debts. It works well if you are disciplined and will stick to the plan, or if you have only a few debts.
Each of these methods require you to focus on paying as much as possible on the first debt, while paying the minimum payment on the remaining debts. When the first balance is totally paid off you move to the next one in the process.
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