Ways To Pay Off Debt

There are four main ways to pay off your debt. Let’s look at them real quick:

1. Pay the minimum payments and wait for the term of the loan to end;
2. Make additional payments, evenly across all debts;
3. Make additional payments, focusing the extra payment on the highest interest rate;
4. Or make additional payments, focusing on the lowest balance debt.

That fourth option is called the debt snowball.

How Does The Debt Snowball Work?

To use the debt snowball method:

1. List all of your debts, the remaining balance, and the monthly payment
2. Pay the minimum payment on all but the lowest balance debt
3. When the smallest debt is paid off, add what you were paying to the minimum payment on the second lowest debt
4. Continue down the list, always focusing on the lowest balance debt item