Paying off high-interest debt first is commonly referred to as the avalanche method. ![]() Anyone with a student loan or mortgage knows the frustration of making monthly payments that only go toward the interest, not the principal. Credit cards with higher-than-average APRs can be especially hard to pay off. There’s a good reason to pay off your highest interest debt first - it’s the debt costing you the most. ![]() This may discourage some people, increasing the likelihood of giving up on the strategy.īest for: Minimizing the amount of interest you pay. Key drawbacks: If your largest debt also has the highest interest rate, it could take a while to pay it down. Key advantages: Allows you to save money and redirect funds to other financial goals. Option 1: Pay off the highest-interest debt first Once you choose a debt repayment method, the most important thing you can do to become debt-free is to stick with it. Simply making small monthly payments spread across all your debt could result in you paying more interest over an extended period. However, it may be wise to focus on some debts above others. There are several strategies to start paying down debt. While you should always make at least the minimum monthly payment on every debt you owe, it can be hard to know how to prioritize any extra debt repayment dollars each month. ![]() That doesn’t include additional debts, such as mortgages, car loans and student debt. Americans with credit cards average $5,525 in debt, according to a 2021 Experian report. You’re not alone if you have debt on more than one credit card or loan.
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