Debt recommendation is all over the place. And never all of it’s good.

From viral TikToks to well-meaning members of the family, you’ve most likely heard your fair proportion of scorching takes on how you can repay debt. A few of it’s useful. However a few of it’d truly value you extra in the long term.

Under, we’re debunking 9 widespread debt reimbursement myths—and changing them with actual discuss and sensible methods. As a result of your debt payoff plan shouldn’t simply sound good. It ought to truly work on your life and your cash.

Delusion #1: You Ought to All the time Pay Off Your Mortgage Early If You Can

Paying off your mortgage forward of schedule can really feel like the final word monetary flex. Whereas there could also be vital advantages, this choice is determined by your private monetary state of affairs. 

Mortgages sometimes supply decrease rates of interest in comparison with bank cards or private loans. Earlier than throwing additional mortgage principal funds, contemplate what else is in your monetary panorama that wants tending to. Should you’re carrying high-interest debt—otherwise you haven’t maxed out your 401(okay), constructed an emergency fund, or began investing—these could also be value prioritizing.

There’s nothing incorrect with turning into mortgage-free. Nevertheless it’s value zooming out and asking: Is that this one of the best subsequent transfer for all my monetary targets? 

Delusion #2: Carrying a Stability on Your Credit score Card Helps Your Credit score Rating

Regardless of what you might have heard by means of the grapevine, carrying a stability does not assist your credit score rating. Quite the opposite, it will probably harm your rating and price you in curiosity.

The thought of this debt reimbursement delusion possible stems from the truth that utilizing credit score commonly (and responsibly) does assist construct your credit score. However right here’s the important thing: You solely want to make use of your card, not carry a stability. Paying it off in full every month exhibits lenders you’re dependable and saves you from paying additional.

Carrying a stability, particularly one which’s greater than 30% of your obtainable credit score, can truly drag your rating down. And people curiosity prices add up quick. (The common bank card rate of interest as of early October 2025 is 24.19%.)

So don’t fall for the parable. Use your card, pay it off, and maintain your credit score robust with out spending a dime in curiosity.

Delusion #3: The Debt Avalanche Is All the time the Smartest Technique

The debt avalanche methodology—the place you repay money owed with the very best rate of interest first—is mathematically environment friendly. It could prevent extra on curiosity over time. But when that high-interest debt can be your largest stability? It’d take months (or years) earlier than you are feeling such as you’re making a dent.

That’s why the debt snowball—the place you repay the smallest stability first—will be extra motivating for some folks. Knocking out a full account rapidly offers you a psychological win. And people small wins can construct momentum when staying motivated feels exhausting.

There’s additionally a center floor: the blizzard methodology, the place you begin with one fast win after which swap to interest-based priorities.

Backside line: The “finest” technique is the one you’ll truly keep on with. Should you want motivation to remain on observe, a snowball could be smarter than an avalanche.

Delusion #4: It’s Okay To Drain Your Financial savings to Pay Off Debt

It’s tempting, particularly when high-interest debt feels prefer it’s consuming your paycheck alive. However wiping out your emergency fund to eliminate debt can backfire quick.

Let’s say you utilize your final $3,000 in financial savings to remove a bank card stability. Whereas satisfying, that transfer may go away you financially uncovered when an surprising occasion strikes —like a serious automobile restore, an emergency medical invoice, or sudden job loss. With out a monetary cushion, you would possibly find yourself proper again in debt by counting on high-interest bank cards or perhaps a payday mortgage to get by.

A better technique would stability debt payoff with constructing financial savings. An excellent rule of thumb is to have three to 6 months’ value of residing bills saved in an emergency fund. Should you’re simply beginning out, decide to saving at the least one month’s value of important bills instantly earlier than tackling debt extra aggressively. That manner, you’re defending your self from the surprising whereas nonetheless making progress.

Delusion #5: If You Can’t Pay Off All Your Debt, It’s Not Value Paying Additional

When debt feels overwhelming, it’s simple to fall into an all-or-nothing mindset. Nonetheless, the concept it’s not value making greater than minimal funds except you possibly can wipe out your stability is a pricey debt reimbursement delusion.

Each additional greenback you set towards your debt helps cut back the quantity of curiosity you’ll pay over time. 

For instance, say you could have a $5,000 bank card stability at 20% APR with a $100 minimal cost. Paying an additional $100 per 30 days (on high of the minimal) may shave over six years off your reimbursement timeline and prevent over $4,000 in curiosity.

The journey to debt freedom is received by constant small actions, not only one grand payoff. 

Delusion #6: All Debt Is Unhealthy Debt

Debt typically carries a detrimental connotation—and for good cause. Excessive-interest bank cards, payday loans, and overspending can do actual injury to your funds. However not all debt is routinely dangerous.

Some varieties of debt can truly show you how to construct wealth. 

• A mortgage, for instance, may also help you purchase a house that grows in worth over time. 
• A low-interest scholar mortgage would possibly provide you with entry to a level that will increase your lifetime incomes potential. 
• A low-interest enterprise mortgage can present the capital obligatory to assist launch or increase a enterprise, probably producing larger income.

The secret’s intention. Is the debt serving to you attain a long-term purpose—or funding a way of life exterior of your finances? If it’s the previous, it might be a useful gizmo. If it’s the latter, it’s most likely time for a reset.

Delusion #7: You Ought to By no means Shut a Credit score Card, Even After Paying It Off

This piece of credit score recommendation is usually incomplete and isn’t a hard-and-fast rule.

Sure, closing a bank card can negatively have an effect on your credit score rating. It’d shorten your common credit score historical past or enhance your credit score utilization ratio, particularly if it’s a card with a excessive restrict. 

Nonetheless, in some circumstances, closing a bank card could be monetary step. If the cardboard prices a steep annual charge, has a excessive APR, or acts as a temptation to overspend, closing it might be smarter on your long-term well-being. Your psychological and monetary well being matter simply as a lot as your credit score rating.

There’s a center floor to contemplate earlier than closing your account. You’ll be able to probably downgrade a bank card to a model with out an annual charge or negotiate a decrease rate of interest in addition to request any penalty charges get waived. Moreover, for those who maintain one other card with the identical issuer, ask for those who can switch the unused credit score restrict to that energetic account earlier than closing the previous one. This may protect your whole obtainable credit score, which helps preserve a robust utilization ratio.

Delusion #8: You Must Be Debt-Free Earlier than You Begin Saving or Investing

It’d really feel logical to knock out all of your debt earlier than diverting your cash elsewhere. In any case, why make investments if you’re paying 20% curiosity on a bank card? However taking an all-or-nothing strategy creates monetary vulnerability and sacrifices long-term progress.

Should you wait to construct financial savings till you’re debt-free, you could possibly danger going proper again into debt when surprising bills pop up—like a automobile restore or vet invoice. Moreover, delaying funding for too lengthy means lacking out on the magic of compound progress (which is a key element of constructing wealth).

A greater technique? Discover a stability. You may make regular progress in your debt whereas nonetheless contributing to an emergency fund or retirement account. Even $25 a month provides up. 

Dig Deeper: 11 monetary errors it’s possible you’ll be making

Delusion #9: Debt Consolidation All the time Saves You Cash

In idea, rolling a number of money owed into one mortgage with a decrease rate of interest feels like a no brainer. However in observe, debt consolidation isn’t routinely a cash saver. It is determined by your credit score rating, mortgage phrases, and any charges concerned. Some loans include origination charges or longer reimbursement intervals that value you extra in the long term.

It’s additionally value asking: are you fixing the issue or simply pushing it round? Should you’re consolidating with out addressing the habits that precipitated the debt, you danger working up the previous credit score strains and ending up with much more whole debt.

That mentioned, when finished thoughtfully, debt consolidation can cut back your month-to-month funds, simplify your funds, and show you how to study how you can higher handle your cash. Should you’re contemplating it, instruments like a private mortgage by means of Prosper* may also help you evaluate your choices and select what’s finest on your finances.

Conclusion: Your debt reimbursement technique ought to be private

On the subject of paying off debt, what works on your buddy, your favourite finance influencer, and even your previous self may not be one of the best match proper now.

Perhaps you’re juggling high-interest debt and constructing an emergency fund. Perhaps you’re weighing whether or not to take a position or repay your scholar loans quicker. The “proper” reply is determined by your earnings, targets, rates of interest, and peace of thoughts.

The secret’s to keep away from debt aid scams, know your choices, and create a plan that helps your full monetary image.

*All private loans made by WebBank.