Office of Enrollment Management

Paying Debt Down

Crack the Code: Paying Debt Down 

Often people do not know where to begin when they want to pay off debt. Two methods are used frequently with great success. The first step to paying debt off is to gather a list of all debts owed, the interest rates on the debt, and the total amount owed.  From here, you need to decide which method is best for your circumstances.

Avalanche Debt method with snow avalanche coming down mountain

Avalanche Debt Method

1. List your debts in order of highest interest rate to the lowest. 

2. Pay minimum payments on all debts and put any extra money on the first debt.  All extra money from the budget will go towards paying this debt off first. 

3. After the first debt is paid, take the minimum payment from the eliminated debt and add it to the second debt listed.  Pay this debt until it is eliminated.

4. Continue this process until all of your debts have been paid.

This plan prioritizes the highest interest rate to be eliminated first. This means that it is the plan that will save you the most in interest.  It can be difficult to maintain as it may take months to achieve the first debt payoff. 

Read more about the Avalanche payment plan. 

Calculate your payoff using the avalanche debt method. 

Snowball Debt Method with man rolling a snowball and the ball getting larger.

Snowball Debt Method

1. List your debts in order of smallest amount owed to highest amount owed. 

2. Pay minimum payments on all debts and put any extra money on the first debt.  All extra money from the budget will go towards paying this debt off first. 

3. After the first debt is paid, take the minimum payment from the eliminated debt and add it to the second debt listed.  Pay this debt until it is eliminated.

4. Continue this process until all of your debts have been paid.

This plan prioritizes quick victories to encourage you to continue paying your debts. This means you will be energized by knocking of smaller debts first and rolling the previous payment into the next debt to be paid off. 

Read more about the snowball debt method.

Calculate your payoff using the snowball debt method. 

Which is best?

There are advantages and disadvantages to both methods.  You need to decide which method works best for you and your list of debts. Will a quick win keep you motivated to keep paying debt? If so, then the snowball method is best for you. Would you rather knock the debt with the highest interest rate off first even if it takes you longer to achieve it? If so, the avalanche method is best. 

Either way pick a plan and start to tackle your debt. You will be able to achieve your dreams of a vacation, buying a home, or retiring sooner without debt in your financial life. 

Compare the two plans to decide which is best for you in achieving your goals to pay down debt. 

Celebrating the Victories

Paying down debt can become frustrating and hard.  Remember to celebrate each victory along the way.  One way to celebrate is to share your wins. Share your victories, small or large, with us!