What is the Debt Avalanche Method? | OkCarz

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How to Pay Off Debt with the Avalanche Method

Do you hold debt? Whether it is your credit card, a car loan, a student loan, or medical bills, nearly every American carries some debt, big or small. As you accumulate more debt, it may not feel obvious which debts you should tackle first. Should I spread out my payments among all my debts or focus on just one? At OKCarz, we will discuss what the Debt Avalanche Method is and how it can help you pay off your debt.

[ READ MORE: Tips to Improve Your Current Personal Budget ]

How the Debt Avalanche Method Works

Graphic showing a man pushing the letters that spell "Debt" off a cliff

The idea with the Debt Avalanche Method is to tackle the high-interest debt first, regardless of the principal is still on each of your debts. This method is known for being very cost-effective and quick. Here’s how you can use the Debt Avalanche Method:

  1. Continue making minimal payments on each of your debts like normal.
  2. Make a list of your debts and list the interest rate for each.
  3. Calculate how much money you have left after paying your bills.
  4. Use any remaining money you are able to spend towards your highest interest debt.
  5. Continue until your highest interest debt is fully paid off, then move on to the next one.

By sticking to the Debt Avalanche Method, you can reduce your debt quickly while minimizing the amount of interest you pay. However, you should note that the Debt Avalanche Method isn’t the best option for everyone as it can take a long time to see results. If you give the Debt Avalanche Method a shot and it feels stressful to use, consider switching to the Debt Snowball Method. Also, don’t forget to stay positive about tackling your debts. Afterall, every extra payment you make will bring you a step closer to being debt-free.

Are you looking for more ways to reduce debt and save money? Follow the OKCarz blog for a diversity of informative posts, including financial tips, vehicle maintenance FAQs, and more!

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