By Amrita Jayakumar
Published May 10, 2019
Two strategies to pay off debt include the debt snowball and debt avalanche. With snowball, you pay off debts from the smallest amount to the largest by taking care of the little one first, while paying minimums on the others. Once it’s paid, you roll what you had been paying on it into your payments on the next debt, and so on.
The avalanche approach prioritizes paying off the debt with the highest interest rate first and paying minimums on others. A credit card would be paid off before a student loan, for example. “The snowball works better for behavioral purposes,” Brancaccio says. If you need quick wins to stay motivated, choose snowball. But if you’re committed for the long haul, use avalanche. “The avalanche mathematically will generally work out better,” he says.