Borrowing

How to pick the right way to pay off your debt

Twenty/20

Three in four Americans have some form of personal debt, such as an auto loan, mortgage, or credit card balances, according to data from Northwestern Mutual. If you're juggling multiple balances, coming up with a repayment strategy can help you get out of debt faster.

"You want to make sure you have your own strategy," says Bola Sokunbi, author of "Clever Girl Finance." "You can't rely on the creditor to help you create your plan to debt freedom, because they don't necessarily want you to pay off your debt. They want you to stay in the cycle for as long as legally allowable."

Check out the video below for more of Sokunbi's advice on getting your debt under control.

VIDEO4:3004:30
Should you get a debt consolidation loan?

One way to streamline your obligations is to consolidate a few balances into one new loan, such as a personal loan or a credit card balance transfer. Then you only have to keep track of making payments on your one debt, as opposed to multiple loans and credit cards. But before you borrow, read the terms carefully, she warns.

Often, you can get a low rate or no-interest introductory period, she says. But if you don't pay off your debt in that window of time, rates will jump up. With a credit card balance transfer, for example, any balance reamining after a rate expires would be subject to the card's regular rate. That's current an average of nearly 18%, according to CreditCards.com.

Finding the fastest way to eliminate debt

Make a list of your different debts, including balances and interest rates. Then see how these three popular methods might work for your situation:

  • Snowball: This strategy has you focus on paying off your smallest balances first. It's the same logic as handling the easy things on your to-do list before the hard ones — and studies have found it can keep you on track with debt repayment. As you eliminate smaller balances, you'll have fewer payments to make each month, which can help free up more cash.
  • Avalanche: With this method, you'll prioritize the debt with the highest interest rate first. This way, you save more money in interest payments over time and can knock out debt faster.
  • Blizzard: This is a combination of both snowball and avalanche, meaning you alternate between paying off your smallest debt and paying off your debt with the highest interest rate.

There's no one "perfect" method, Beverly Harzog, author of "The Debt Escape Plan," told Grow earlier this year. "Whichever one works for you is the right choice," she says.

More from Grow:

Get the Grow Newsletter Every Week
Weekly money news and advice to grow your wealth, delivered straight to your inbox.
Weekly money news and advice to grow your wealth, delivered straight to your inbox.
 

acorns+cnbcacorns cnbc

Join Acorns

GET STARTED

About Us

Learn More

Follow Us

All investments involve risk, including loss of principal. The contents presented herein are provided for general investment education and informational purposes only and do not constitute an offer to sell or a solicitation to buy any specific securities or engage in any particular investment strategy. Acorns is not engaged in rendering any tax, legal, or accounting advice. Please consult with a qualified professional for this type of advice.

Any references to past performance, regarding financial markets or otherwise, do not indicate or guarantee future results. Forward-looking statements, including without limitations investment outcomes and projections, are hypothetical and educational in nature. The results of any hypothetical projections can and may differ from actual investment results had the strategies been deployed in actual securities accounts. It is not possible to invest directly in an index.

Advisory services offered by Acorns Advisers, LLC (“Acorns Advisers”), an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). Brokerage and custody services are provided to clients of Acorns Advisers by Acorns Securities, LLC (“Acorns Securities”), a broker-dealer registered with the SEC and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Acorns Pay, LLC (“Acorns Pay”) manages Acorns’s demand deposit and other banking products in partnership with Lincoln Savings Bank, a bank chartered under the laws of Iowa and member FDIC. Acorns Advisers, Acorns Securities, and Acorns Pay are subsidiaries of Acorns Grow Incorporated (collectively “Acorns”). “Acorns,” the Acorns logo and “Invest the Change” are registered trademarks of Acorns Grow Incorporated. Copyright © 2019 Acorns and/or its affiliates.

NBCUniversal and Comcast Ventures are investors in Acorns Grow Incorporated.