Frequently Asked Questions
What is the debt snowball method?
The debt snowball method focuses on paying off the smallest balance first while making minimum payments on all debts. Once the smallest debt is paid off, you roll that payment into the next smallest. This builds momentum through quick wins.
What is the debt avalanche method?
The debt avalanche method focuses on paying off the highest interest rate debt first while making minimum payments on all debts. This mathematically saves the most money on interest but may take longer to see debts eliminated.
Which method is better?
The avalanche method saves more money in interest, but the snowball method provides faster psychological wins. Choose avalanche if you're disciplined, snowball if you need motivation. Both work — the best method is the one you'll stick with.
Should I consolidate my debt?
Debt consolidation combines multiple debts into one payment, ideally at a lower interest rate. It works best if you qualify for a low-rate personal loan (6-12% APR) and have high-interest credit cards (18-25%). Avoid consolidation if it doesn't reduce your rate or if you'll rack up new balances.
How much extra payment should I make?
Even small extra payments make a huge difference. An extra $100/month on a $5,000 credit card at 20% APR saves over $2,000 in interest and pays it off 2 years faster. Start with what you can afford — $50-$200/month is a great starting point.
Is debt settlement a good idea?
Debt settlement (paying less than owed) damages your credit score significantly and may be taxable income. Only consider it for accounts already in collections. For most people, avalanche payoff or nonprofit credit counseling is a better option. Avoid for-profit debt settlement companies.