The debt avalanche method prioritizes debts based on interest rates, paying off the highest-interest debts first. Here’s how it works:
- List your debts from highest to lowest interest rate.
- Make minimum payments on all debts except the one with the highest rate.
- Put any extra money toward the highest-interest debt until it’s eliminated.
- Proceed to the next debt with the highest rate.
Pros:
- Saves more money on interest over the long term.
- Shortens the overall payoff time.
Cons:
- Progress may feel slower, especially if the highest-interest debt has a large balance.
Which Method is Best for You?
- Choose Debt Snowball If: You need motivation to stay on track and are more encouraged by small victories.
- Choose Debt Avalanche If: You’re focused on minimizing interest costs and have the discipline to stick with the strategy.
Both methods are effective if applied consistently. The key is selecting the one that aligns with your personality and financial goals, ensuring you remain committed to becoming debt-free.
