With so many debt payment advice, you may be wondering what is the best strategy to pay off your debts. Should you focus on the numbers or the psychology behind debt payment? Is it better to pay off your smallest debt first or the one with the highest interest rate? 

In the end, it all boils down to choosing between two main schools of thought: the snowball method or the avalanche method. But what are these and which one is the best for you?

Different researches show different results when it comes to the best strategy to pay off your debts so it’s easy to get confused. Here are the two debt payment plans briefly explained. 


The debt snowball method

Just like the snowball effect starts from something small and builds into something bigger and, potentially, more beneficial, so does the debt snowball method. 

This strategy consists of paying off your smallest debt first and moving on towards your bigger debts. The strategy focuses on creating momentum which leads to more motivation and faster progress. The idea is that by entirely paying off on debt, you’ll be more motivated to keep up with your debt payment and move faster towards paying off your bigger debts.


The debt avalanche method

While the snowball method is centered on human psychology, the avalanche method focuses mainly on numbers. 

When adopting the debt avalanche strategy, you will tackle your highest-interest debt first. This means you will focus on saving that interest money by making larger payments on the debt with the highest interest rate first and moving on towards the ones with the lowest interest rate. 

This strategy may take longer but will save you more money. On the other hand, the snowball method may be faster but will cost you more. 


Which debt-reduction strategy to choose?

Many studies show how the debt snowball method is more effective because it creates a feeling of progress. Getting rid of a small debt in a short time may not be a big step in terms of numbers but it fuels the motivation necessary to stick to the plan.

Ultimately, debt payment is personal and you should choose the best strategy for you based on your goals and mindset. 

Do you want to save more money from interests and you don’t mind taking longer to repay your debts? Then maybe the debt avalanche method may be for you. Alternatively, if you are looking to create that momentum and feeling of progress that will keep you on track, choose the debt snowball method.

Rob Berger goes into more detail on the two strategies on Forbes, complete with examples and numbers.