Carrying debt is a reality for millions of people - mortgages, car loans, student loans, and credit cards. The good news is that with the right strategy, you can pay off debt faster than your lender expects and save a significant amount of money in the process.
The Two Core Strategies
1. The Avalanche Method (Mathematically Optimal)
Pay the minimum on all debts, then put every extra dollar toward the highest-interest debt first.
Why it works: High-interest debt costs the most money over time. Eliminating it first reduces the total interest you’ll ever pay.
2. The Snowball Method (Psychologically Powerful)
Pay the minimum on all debts, then put every extra dollar toward the smallest balance first.
Why it works: Quick wins build momentum. Paying off a small debt completely gives a psychological boost that keeps you motivated.
Making Extra Payments
Even a small extra payment can have a dramatic impact:
| Extra Monthly Payment | Years Saved on a $200K, 30yr Loan at 6% | Interest Saved |
|---|---|---|
| $50 | 2.5 years | ~$18,000 |
| $100 | 4.5 years | ~$30,000 |
| $200 | 8 years | ~$50,000 |
Refinancing
If interest rates have dropped since you took out your loan, refinancing to a lower rate can reduce your monthly payment and total interest cost. Even a 0.5% reduction on a large mortgage saves tens of thousands over the loan term.
The Debt-to-Income Ratio
Lenders assess your DTI ratio - your total monthly debt payments divided by your gross monthly income. A DTI below 36% is generally considered healthy.
Try the Calculators
Plan your payoff strategy using our Loan Calculator or Mortgage Calculator.