Paying off your debt is a liberating feeling. If your New Year’s resolution is to become debt-free, consider using one of these debt payoff strategies to achieve your goal.
The snowball payoff method involves paying off your smallest balance first. Start by paying the minimum on all but the smallest balance on which you pay as much as you can afford until it’s paid in full. Then roll that amount into the next debt on your list.
The avalanche method is is similar to the snowball method but has a different focus. The goal is to pay the least amount of interest. Whereas the snowball method doesn’t consider interest rates when prioritizing debts, the avalanche method works to pay off the debt with the highest rate first. Make your list of debts and include the interest rates for each one. You’ll use the same payment strategy as with the snowball method, except you’ll pay off debt with the highest interest rate first.
Debt consolidation works to combine multiple debts into one. Generally, debt consolidation aims to reduce your monthly payment and may or may not decrease your interest rate. If you’re considering debt consolidation, be sure to calculate the total interest you’ll pay under the new loan versus the old rate.
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