When it comes to repaying debt, two popular methods are the snowball and avalanche methods. The snowball method involves paying off the smallest debt first, regardless of interest rates, and then moving on to the next smallest debt. This approach can provide a psychological boost as debts are paid off more quickly, giving a sense of accomplishment and motivation to continue.

On the other hand, the avalanche method focuses on paying off debts with the highest interest rates first, potentially saving money on interest in the long run. By tackling high-interest debts first, this method can lead to overall interest savings and a faster path to debt freedom.

For example, let's consider a person with three debts: a $500 credit card balance at 15% interest, a $1,000 personal loan at 8% interest, and a $2,000 student loan at 5% interest. Using the snowball method, they would focus on paying off the $500 credit card balance first, while the avalanche method would prioritize the credit card balance due to its higher interest rate.

References:

• Investopedia - Avalanche vs. Snowball Method
• NerdWallet - Snowball vs. Avalanche: Which Debt Payoff Method Is Best for You?