How To Decide Which Debt To Pay Off First

Written By Mary Beth Eastman
Last updated February 20, 2019

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Personal Finance
August 17, 2018

Simple. Thrifty. Living.

Getting out of debt can seem like an impossible task, especially if you have accumulated thousands of dollars in high-interest credit card debt. Developing a debt repayment plan, however, makes it much easier to reach your goal.

Before you can develop a plan, you need to know exactly what you owe. Make a list of your debts, including the amounts and interest rates. Having this information in front of you will help you choose a debt repayment method that works well.

If your interest rates are too high because of your credit score, a credit repair company can help with that. Check out our credit repair reviews to get an idea of how the companies work.

The avalanche method will save you the most amount of money while you repay your debts. By focusing on high-interest accounts, you eliminate the debts that cost you the most money.

You can see this by comparing different interest rates. If you owe $1,000 to an account with a 20 percent interest rate, you will spend $221 in interest by repaying the debt over 24 months. If the account had a 6 percent interest rate, you would only pay $64 in interest over 24 months.

If you want to save as much money as possible, then the debt stacking is the better approach for you.

The snowball method doesn’t maximize your savings. It can, however, keep you motivated to repay your debts.

Paying credit card bills isn’t exactly a fun thing to do or think about. It becomes much more invigorating, though, when you see your account balances reach zero. Perhaps it will only take you a few weeks or months to eliminate one of your debts. You can use that momentum to stay focused on bringing your other accounts to $0.

If you have anxiety about tackling debt, then the snowball approach is probably better for you because it will keep you motivated and help you build confidence. If you’re truly in over your head, you can explore a reputable debt relief company to help dig you out. This review of National Debt Relief vs. Freedom Debt Relief will get you started.

No matter which method you choose, it’s important to make a repayment plan that keeps you on track. Without a plan, it’s unlikely that you’ll ever reach your financial goals.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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