If you want to make a dent in your debt, the debt snowball could be the best way to do it. This means you make a point of paying off your smallest debt first, while making minimum payments on all the rest. Once that first debt bites the dust, you’ll find the momentum keeps rolling, as you start paying off debts one by one.
A scientific study found this could be the best strategy for paying off credit card debt. Researchers discovered that paying off a larger portion of a smaller debt has the most powerful effect on keeping people motivated—chalk it up to the power of small wins.
On the slopes, an avalanche is never a good thing—but when it comes to paying off debt, it’s the best way to cut down on interest charges. Find out the interest rate on each of your debts, then list them from the highest rate to the lowest. (If you have any payday loans, these will have the highest interest rates by far.) You’ll want to focus on paying off the debt that’s charging you the most interest. Keep making the minimum payments on your other debts, but put any extra money toward the one that’s costing you the most.
This strategy may not give you instant results. But over the long run, you’ll end up paying less money toward your debt if you use the debt avalanche to tackle the one with the most interest first. Once that debt is paid off, you would then apply this strategy to the debt with the next highest rate.