Decoding The Most Successful Debt Repayment Strategies: Snowball vs. Avalanche
Discovering the optimal way to eliminate your debt can often feel like an insurmountable task. You might have heard about the snowball and avalanche strategies, or perhaps you’re simply overwhelmed by your mounting debt and unsure where to start. Debt can often feel like a chilling, persistent specter from your past, preventing you from moving forward. If you feel shackled by debt, here’s what you can do to break free.
There exist proven debt repayment strategies that can help you regain control of your finances and eradicate debt quickly. If you’re committed to liberating yourself from debt so you can progress with your life, it’s worth examining the snowball and avalanche strategies.
Understanding Snowball vs Avalanche Strategies
Snowball and avalanche strategies both start with paying the minimum amount on all your debts and then focusing extra payments on one specific debt. The distinction between the snowball and avalanche methods lies in how you select the debt that will receive these additional payments.
Any extra funds you can muster should be directed towards this one debt.
The Mechanics of the Snowball Method – Start with the Smallest Debt
Under the snowball method, after paying the minimum amount on all your debts, you target the smallest debt for extra payments. Once it’s settled, you divert the money you were using for that debt towards the next smallest debt. A free online debt snowball calculator can be an invaluable tool to help you design an effective strategy to become debt-free.
The snowball plan gains momentum as you move from the smallest to the largest debt; like a snowball growing as it rolls downhill, your payments increase in size. The benefit of the snowball method is the immediate gratification it offers. Settling that first debt provides a sense of achievement, and this success serves as a powerful motivator to keep going.
The Workings of the Debt Avalanche Method – Begin with the Highest Interest Rate
The debt avalanche method operates similarly to the snowball method, but the debt you give special attention to is the one with the highest interest rate, regardless of its size. By first settling your debt with the highest interest rate, followed by the second highest, and so on, you save on interest payments which can then be directed towards paying off your other debts.
Given that average credit card interest rates range between 19% and 30%, making only the minimum payment often proves insufficient. The avalanche method results in less overall interest paid compared to the snowball method. Making payments that significantly reduce your total debt can begin to improve your credit score. However, you might wonder whether the potential savings in time and interest are significant.
Snowball vs Avalanche – Which Method Will Help You Clear Your Debts Quickest?
People often have strong preferences for one debt repayment method over the other. It can be challenging to determine which strategy will enable you to clear your debts fastest. Is the snowball or avalanche method superior? Use our debt clearance speed calculator to find out.
In the end, the choice between the snowball and avalanche methods might not be about the numbers. Surprisingly, the psychological aspect of money management often plays a critical role in debt repayment. Choose the method that keeps you motivated to become debt-free and aligns with your financial goals. The difference between these two methods is typically minor, provided you’re moving towards your end goal.
That said, if you derive satisfaction from systematically eliminating your debts one by one, the snowball method might be the best fit for you. If minimizing interest payments is your priority, the avalanche method could be a more suitable choice. Establish online or mobile banking with your bank to pay off your credit card online swiftly and conveniently. Ultimately, the best method to eliminate debt is the one that works for you.
Reach Out to Us for More Guidance on the Best Way to Clear Debt
In the grand scheme of things, motivation is a key factor. Whether it’s credit card debt or a car loan, as long as you’re seeing a steady decrease in your balances and outstanding debts, you’re on the right track. If you need any assistance along the way, we’re here for you. We can offer advice on the most effective way to pay off debt. We can also provide referrals, discuss debt repayment options, and offer solutions that can help you achieve your financial goals. Feel free to contact us anytime by email , phone at 1-877-879-4770.
