Managing multiple debts can be overwhelming, but there are strategies to help. Two common debt repayment strategies include the debt snowball and the debt avalanche methods. Each method offers a different approach to debt management.
Debt Snowball Method
The debt snowball method is a strategy to help you pay off debt step by step — and stay motivated while doing it. You begin by focusing on paying off your smallest debt first, no matter what the interest rate is. Each time you pay off another debt, your available payment amount “snowballs,” or grows larger and helps you pay off the next one even faster.
Debt Avalanche Method
Instead of focusing on the size of the debt, the debt avalanche method focuses on each debt’s annual percentage rate (APR) — the yearly cost of borrowing money, including interest and fees. With the debt avalanche method, you’ll aim to save on interest by targeting the debt with the highest APR first.
Original reporting: KRDO (Colorado Springs metro) — read the source article.
