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Why You Should Prioritize Paying Off High-Interest Debts First

When it comes to paying off debt, many people are tempted to focus on the smallest balances first. However, this approach can actually end up costing you more money in the long run. Instead, prioritize paying off high-interest debts as soon as possible. This will save you a significant amount of money in interest payments over time.

For example, let's say you have two credit cards with different interest rates and balances. One card has a balance of $1,000 at an 18% interest rate, while the other has a balance of $5,000 at a 6% interest rate. If you focus on paying off the smaller balance first, it may take you several years to pay off both debts. On the other hand, if you prioritize paying off the high-interest debt first, you'll save thousands of dollars in interest payments and be debt-free much sooner.

The Snowball Method vs. The Avalanche Method: Which is Best?

When it comes to paying off debt, there are two popular methods that people often debate: the snowball method and the avalanche method.

The snowball method involves paying off your debts one by one, starting with the smallest balance first. This approach can be psychologically beneficial, as you'll see progress quickly and get a sense of accomplishment as each debt is paid off.

On the other hand, the avalanche method involves paying off your debts in order of interest rate, from highest to lowest. This approach may not provide the same psychological benefits as the snowball method, but it can save you more money in interest payments over time.

Additional Tips for Paying Off Debt Faster

In addition to prioritizing your debts and choosing a repayment strategy, there are several other steps you can take to pay off your debt faster.

First, consider consolidating your debt into a single loan with a lower interest rate. This can simplify your payments and save you money on interest.

Second, try to increase your income by taking on a side hustle or asking for a raise at work. This will give you more money in your budget to put towards your debt each month.