Personal Finance

Q&A: What is Debt Stacking?

Debt Stacking is a common strategy to pay down debt that involves paying the minimum payments on all debt except for the one that has the highest interest rate, which is to be paid off most aggressively. Once the first debt is paid off completely, then you change the target to the next highest interest rate, working your way down to the lowest interest rate and finally paying that off.

Pro Tip: Debt Stacking is the least costly way to pay down debt, and therefore, the most effective.

Below is a table of how this works. In the figure below, the debts are listed in descending order from highest interest rate to lowest:

Suggested: What debt should I *not* pay off early?

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