How to Pay Off Your Debt with the Interest Rate Debt Payoff Method

There are two main ways to pay off your debt, and we recently wrote about how to pay off your debt with the Snowball Method.  Out of the two approaches, the majority of the time, the Interest Rate Method gets your debt paid faster and saves more money. However, it is only for those who are extremely patient and don’t need the immediate gratification of seeing your debt list reduced quickly.

While you do save more money by paying off your largest interest rate amounts first, this may be your larger “amount owed” debts as well. This means if your highest debt is a $10,000 credit card balance with 24% interest rate, you would start paying extra on that debt first, even if you have a smaller credit card balance with a 12% interest rate.  However, you have to be very patient with this method if you have a larger amount at a larger interest rate. So, that is why we recommend going with the method that suits your personality best. Make sure you pick one you can stick to for the long-term. That is your best method no matter which method you choose.

Here are our tips for starting the Interest Rate Method to get your largest interest debts paid off first.

1. Check out our Financial Freedom Plan, and then head over and read about our Debt Repayment Plan and print out the printables to list your debt. List every single debt starting with the largest interest rate debts first then working your way down to the smallest interest rate debts.  It helps if you print out our entire Family Binder as well to keep your home organized.
2. After you save your first $1,500 (Step #3 of our Financial Freedom Plan) then start applying any extra money towards paying off the largest interest rate first, and then work your way down the list.
3. One thing we did to become debt free faster with the snowball method was to work our top side hustles that helped us earn extra income quickly.  Check out our 50+ Top Side Hustles for getting out of debt.
4. Decrease spending so you can put more towards debt. You might want to start our 31 Day Spending Freeze Challenge series to help you get out of debt faster by spending less.

Comment below and let us know which method you feel works best for you and why.