Financial Fitness - Debt Stacking

22 Feb 2011 · 2 min

Watch on YouTube

1:41

In this short financial advice segment from the Wake Up Today program, money expert Alan Akina introduces the "debt stacking" technique for accelerating debt repayment. He explains that borrowers should prioritize paying off the highest‑interest liability first while making minimum payments on the others. Once the highest‑interest debt is cleared, its payment amount is added to the next‑highest‑interest debt, and so on, creating a cascading effect that speeds up payoff and reduces total interest paid. Using a concrete example with a credit‑card, car loan, and mortgage, Akina demonstrates how monthly payment amounts shift from $200 (credit‑card) to $550 (car loan) and finally to $1,550 (mortgage). He claims this method can eliminate debts quickly and save tens or hundreds of thousands of dollars in interest, and directs listeners to the Wake Up Today website for more tips.

Paying off debt is never easy, but there are smart ways to do it best.
On today's Financial Fitness Tip of the Week, Alan— money expert Alan Akina shares one smart technique you might be able to use. Here's Alan.
Good morning, everyone. Today's tip will help you to trim off your debt super fast using a technique I call debt stacking. Now, how does this work? Let's assume that you have 3 liabilities: a credit card, a car loan, and a mortgage. We're gonna start by paying off the highest interest rate debt first. In this case, it's probably the credit card. We're also gonna make minimum payments to the other liabilities. Now, once the credit card is paid off, and let's say it was $200 a month, you can now add that $200 to your car loan, which we'll say had a $350 a month payment. Your new car loan payment is now $550 a month, which should wipe out that car loan really quickly. Now, once the car loan is paid off, we can take the $200 that used to go to the credit card and the $350 that went to the car loan and apply that entire amount to the mortgage, which we'll say was $1,000 a month. You will now be sending in $1,550 a month to your mortgage. Wow! This technique, debt stacking, will wipe out all of your debts super fast and possibly save you tens or even hundreds of thousands of dollars in interest costs. All of our tips are on the Wake Up Today webpage at khon2.com. I'm Alan Akina. See you next week.