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Create a plan to pay off your debts and visualize your path to financial freedom.
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The avalanche method prioritizes paying off debts with the highest interest rates first, while making minimum payments on all other debts. This approach minimizes the total interest paid and is mathematically optimal for saving money.
The snowball method focuses on paying the smallest debts first, regardless of interest rate. This creates a series of "quick wins" that can boost motivation and create momentum. While it may cost more in interest, the psychological benefits can help people stay on track.
Combining multiple high-interest debts into a single loan with a lower interest rate can simplify payments and reduce interest costs. Options include balance transfer credit cards, personal loans, home equity loans, or a line of credit.
Always pay more than the minimum when possible. Set up automatic payments to avoid late fees. Consider temporarily pausing retirement contributions (except for employer matches) to accelerate debt repayment. Create a budget to find extra money to put toward debt.