[skysnap]

When it comes to quickly paying your debt, the stacking method is very popular. This method is also known as debt avalanche method. For people with high interest debt, this method can be really helpful to improve their financial condition. In this article, we are going to take a look at ways to apply this method to your debt situation.

Before we see how to use this method, let's try and understand how this method works.

Debt Stacking : In this method, you have to make a list of the debt based on it's interest rate. You have to order the debt based on the outstanding amount to pay including the interest rate. You have to make sure that you arrange this list as something to pay from highest to lowest.

Let's take an example -

Credit Card Debt : 2500$ (19%)
Home Loan - 1450$ (13%)
Student Loan - 600$ (9%)

Repay : Now that you have stacked the debt from highest to lowest amount. You have to come up with minimum amount that you can pay equally to all the loan. Here the focus should be to pay the highest debt interest first. And once you attack the highest interest debt and it gets cleared, your focus should be on the next debt in the list. You have to continue this till entire loan gets paid off. As you move towards the end of the list, you have more money left to quickly clear the bottom debt as soon as possible.

Benefits of Stacking : This method allows you to stack the debt from top to bottom. Saving you time to clear the highest debt later. So compared to debt snowball, you focus on clearing larger portion of all your outstanding debt. It saves a lot of money being spent on the interest rate. So the time here is saved along with money. And this can be helpful if your financial condition is good and you just want to get out of debt quickly.

Problems with Method : As you can see this method focuses on getting rid of debt quickly. And for this to work, you need a lot of money to attack the highest loan amount first. This is only possible if your earning better salary per month. If your salary is not good then it takes a lot of time to clear the debt. And then crossing off the debt becomes harder. In such case it can be frustrating to work on such method and may not be good for all the people. It can be exhausting to work under this method unless you have multiple sources of income.

Personal debt is difficult topic to discuss. We all have different ways to handle the debt and savings. Though debt stacking clearly gives indication of which type of people can use this method. However it's hard to say what type of people can use this and in how many types of situation. So you just have to try and see what works for you and adjust accordingly. Experiment and see in which situation it can work for you.

If this method works, keep at it. If it doesn't then change your financial strategies.

[germainebull]

This method allows you to stack the debt from top to bottom. Saving you time to clear the highest debt later. So compared to debt snowball, you focus on clearing larger portion of all your outstanding debt. It saves a lot of money being spent on the interest rate. So the time here is saved along with money. And this can be helpful if your financial condition is good and you just want to get out of debt quickly.

Debt avalanche method is a style of paying off debts by starting with those with the highest interest. This helps save a lot of money because interest does not accumulate as much and also gets you out of debt faster compared to debt snowball which pays off small debts first. Here discipline is required because quick results are not visible but the biggest advantage is that you pay off debts quickly and you save a lot of money on interest. Therefore, a person with a stable financial condition can use this method and achieve financial freedom early without much stress and without wasting many resources.

[Spontaneo]

Your article is very difficult to understand.

Would you explain in easier terms how to pay off student loans?

Thank you.

[gwolf666]

You have to be careful with loans; you don't want to create more debt, and above all, you have to pay off all your debts. There's nothing nicer and more relaxing than being free of all kinds of debt. I swear I don't understand people who live in debt; they're completely insane. I hate debt. As soon as I have a debt, I pay it off as soon as possible, and that's how I'm always debt-free.

[germainebull]

Repay : Now that you have stacked the debt from highest to lowest amount. You have to come up with minimum amount that you can pay equally to all the loan. Here the focus should be to pay the highest debt interest first. And once you attack the highest interest debt and it gets cleared, your focus should be on the next debt in the list. You have to continue this till entire loan gets paid off. As you move towards the end of the list, you have more money left to quickly clear the bottom debt as soon as possible.

The key is to organize your debts by highest interest rate, then pay the lowest interest rate on all of them, and attack the one with the highest interest rate first. Once you finish that, you move on to the next one. As your debts decrease, you have the opportunity to pay off the smaller ones faster and relieve the burden faster.