If you’re burdened by debt, you might be eager to find a strategy to become debt-free sooner rather than later. Two popular methods can help you achieve this goal: the debt snowball and debt avalanche strategies. Both approaches have their merits and can be effective in tackling debt, but they differ in their tactics. Understanding these strategies can empower you to choose the one that best suits your financial situation and personal preferences.

The debt snowball strategy is all about building momentum by focusing on quick wins. Here’s how it works: List all your debts from the smallest to the largest balance, regardless of interest rates. Direct your primary focus on paying off the smallest debt first while making minimum payments on the others. Once the smallest debt is settled, take the amount you were paying toward it and apply it to the next smallest debt, in addition to the minimum payment you were already making. Repeat this process until all debts are paid off. This method provides psychological motivation as you witness debts disappearing, encouraging you to stay committed to the plan.

On the other hand, the debt avalanche strategy prioritizes saving money on interest. It involves listing debts from the highest interest rate to the lowest, regardless of the balance. Direct most of your financial effort towards paying off the debt with the highest interest rate first, while still making minimum payments on the others. As each high-interest debt is eliminated, roll the payment amount into the next debt on your list. The debt avalanche method can result in substantial interest savings, making it ideal for those with high-interest debts who can stay motivated without the need for immediate gratification.

In essence, the debt snowball method is best for those seeking a morale boost through quick victories, while the debt avalanche is optimal for those with strong financial discipline aiming to minimize interest payments.