Getting Off the Sinking Ship of Debt: How to Choose the Best Method for Paying Off Your Loans
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Getting Off the Sinking Ship of Debt: How to Choose the Best Method for Paying Off Your Loans

Although it is nearly impossible to avoid debt, you don't have to drown in it

March 1, 2017

One of the paradoxes of modern life is that it is relatively easy to get into debt and hard to get out again. Although it is almost impossible to avoid debt today, you don't have to drown in it.

There are many schools of thought when it comes to paying off debt. Following one of these methods can help you tread water while you pay off enough to reach dry land.

Pay High-Interest Debts First

Many financial experts recommend that you focus on paying off the debts with the highest interest rates first. This is because most of what we have to repay on a loan is actually interest.

The advantage of using this method is that it can save you more money in the long term than any other method. The disadvantage is that it will make only a small dent in the short term because the highest interest rates are likely attached to your largest loans, so it will take a long time to pay them off.

The Snowball Method

Financial expert Dave Ramsey has made this method very popular. This technique requires you to pay off your smallest loans first by adding any extra money you may have to pay off the smaller amounts. Once you pay off these small loans, such as credit card balances, you then take the amount you would have used to pay those loans and put it into the next smallest loan. The payments will roll over—or snowball—to the next one.

The advantage of this method is that paying off any debt, no matter how small, is a victory that will spur you onto paying off the rest. The downside is that you will pay more interest in the long term.


Debt consolidation should always be your last resort. You will hire a debt management firm to contact your different credits and take on all of your debts itself so that you will have only one creditor and one monthly payment to make.

The advantages of consolidating debt are that it will relieve some of your financial stress and may turn variable interest rates into one lower rate. It can also save your credit score and help you keep your belongings if you are close to declaring bankruptcy.

There are two disadvantages to this method. First, you will have to pay an additional monthly service fee to the consolidation firm. Second, consolidating or refinancing federal student loans may cause you to lose certain benefits, such as the options for income-based repayment and deferment.

It isn't easy to pay off debts that you're drowning in, but if you follow one of these methods, you will eventually find dry land.