If you have multiple debts and money is tight, it can be overwhelming even getting started on paying down your debt.

How long will it take? Which way is best?

Let's take a look at some hard numbers.

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I used some averages here, but let's assume you have the following debts:

An auto loan for $25k at 4.71%
A student loan for $5k at 5.8%
Credit card debt of $10k at 18.61%

Which puts you $40k in the hole.

If you only make minimum payments, you will be debt-free after 240 months (20 years).

You will have paid a total of $52,303.11, including $12,303.11 in interest.

If you pay $200/month extra towards your lowest balance first, otherwise known as the debt snowball method, you will be debt-free after 50 months (4 years and 2 months).

You will have paid a total of $47,438.12, including $7,438.12 in interest.

If you pay $200/month extra towards your highest interest balance first, otherwise known as the debt avalanche method, you will be debt-free after 49 months (4 years and 1 month).

You will have paid a total of $45,955.13, including $5,995.13 in interest.

The avalanche saves the most, while the snowball has the advantage of the psychological benefit of paying down the first debt the fastest.

You have to pick the method you'll stick with, but either is obviously better than just making minimum payments.

God Mode Tip: Every increase you make to your extra monthly payment decreases both the payoff timeframe and the amount of interest paid.