Two Ways To Pay Off Debt

If you have debt, you’re not alone. According to Experian’s 2019 Consumer Debt Study, the average American has a personal loan debt of $90,460. Lucky for you, our partners at GreenPath Financial Wellness have provided two ways to pay off your debt. Read on to see if these two methods are right for you.



The Snowball Method suggests you pay off the smallest debt with the lowest interest rate on your credit cards to create a sense of motivation and accomplishment. Paying off your small bills at a higher frequency can motivate you to pay it off faster so you can move on to other debts. For example, you have debts on two credit cards and a loan:
Credit Card A:   $5,167 - 17% APR
Credit Card B:  $3,500 - 12% APR                                             
Loan:                  $900 - 5% APR   

Here, you would pay more on your loan because it has the lowest APR, and you accumulated the lowest amount of debt on it. You would then pay off a little bit to Credit Card A & B, so you don’t get too behind. So for example, you pay $100/month to your Loan and pay $20/month to both Credit Card A & B. However, this method has some pros and cons.

PROS: Gives you quick results. Gives you motivation to pay off your debts. You can see fast progress.

CONS:  This method can make your other debts accumulate interest rates since you’re not paying those off first. This, in turn, can give you more debt in the end.


The Avalanche Method is the opposite of the Snowball Method. Instead of paying off the smallest debt with the lowest interest rate, you pay off the highest debt with the highest interest rate. For example, your debt is as follows:

Credit Card A:   $5,167 - 17% APR
Credit Card B:   $3,500 - 12% APR                                             
Loan:                  $900 - 5% APR   

With the Avalanche Method, you would pay extra to Credit Card A since it has the highest interest rate and pay less towards Credit Card B and your Loan. Let’s say, every month you’d pay $100/month to Credit Card A and pay $20/month to Credit Card B and your Loan. As
always, there are pros and cons to this method:

PROS:  This method is the easiest way to eliminate debt and avoid getting hit with high interest rates.

CONS:  It can take years to eliminate debt with this method because other bills keep coming in.

You may be asking yourself, “so which method should I go with?”  We suggest you go with the method that you feel more comfortable with and one that works for you. The Snowball Method can help you ease into paying off debt. It gives you a sense of motivation to cut back on costs and budget. The Avalanche Method allows you to pay off the debt with the highest interest rate so that you can move on to your other debts. Not everyone is the same. Some might have a higher income than others, so choose the method that allows you to stay on top of your other bills and keeps you comfortable.


For more financial health tips visit our GreenPath Partners here