1. Debt snowball method

This method works best for people who are having a hard time staying motivated. It’s the best approach for households who have a little bit of extra cash left after paying all their essentials, too. You don’t necessarily have to worry about taking on extra work or budgeting too aggressively in order to make it work.

The first step is making a list (or hierarchy) of your debt balances from smallest to biggest. After you finish paying the minimal amount for all of them, pay extra for the smallest one. Keep doing this until that first debt is done and over with. Once you reach that first threshold, repeat the first steps until you’re finally debt-free!

Conquering the smallest balances first will give you enough motivation to stick to this method. It’s also a great way to free up more funds for the following accounts. So, say you have three accounts. Account no. 1’s balance is $15,000 and 16.2% APR, no. 2 is $250 with 19.5% APR and no. 3 is $4,000 with 21.0% APR. In this case, you’d take care of account no. 2 first, then no. 3 and, finally, no. 1.

The disadvantage of this method is that you’ll likely pay more in interest charges. Since you’re not taking interest rates into account in order to stay off with small, motivational payments, you could spend months on the low-cost debt.

2. Debt avalanche method

The debt stacking method, more commonly known as the avalanche method, is almost the opposite of the snowball method. No, you’re not going to pay the highest balance first, hence the *almost*. Instead, this approach focuses on the highest interest rates first.

Let’s come back to our three examples of debt (no. 1 is $15,000 with 16.2% APR, no. 2 is $250 with 19.5% APR and no. 3 is $4,000 with 21.0% APR). Using this strategy you’d start paying off no. 3 first, then move on to no. 2.

Most people say that interest rates make it near impossible to tackle their debt. If you’re in this group then try this approach first. Once you get rid of the extra penalties and fees you’ll free up more and more money for the rest of your debts.

It might be a little bit slow going at first and you shouldn’t expect to see or feel immediate results. But there will be a tipping point, we promise, and as soon as you reach it you’ll know why it was all worth it! After that, you’ll get rid of your debt a lot quicker and all your fees will disappear.

This is also a good way to ensure you’ll never be in the red ever again. If you struggle by paying more on interest rates instead of decreasing the principal, this method is perfect for you.