Debt Snowball Or Debt Avalanche? Which Is Better?

Now that you have made the decision to become debt free, should you start with the debt snowball or the debt avalanche? I’ll break it down for you to help make the choice easier. 

Understand Where Your Debt Came From

People get into debt for many different reasons. Some people have an unexpected medical incident and now owe thousands of dollars in medical bills. 

The Debt Snowball Explained

The debt snowball and debt avalanche payoff methods are plans. They are structures for you to follow in order to achieve your debt free dreams.  

How The Debt Snowball Works

– List out all your debts in order of amount owed – Start at the smallest debt up to the largest debt – After the debts are lined up, you pay the minimum payment on all debts except for the lowest amount. You pay the lowest debt off as fast as you can – As the lowest debt is paid off, move to the next one and so on until you have paid off all the debt

Advantage Of The Debt Snowball

– Great to help people stay motivated    - Quick wins at the beginning to help people see success and keep moving   - Provides a clear plan on how to get out of debt   – Perfect for people who easily lose motivation or have trouble completing tasks

Disadvantage Of The Debt Snowball

– Takes longer to get out of debt compared to the Debt Avalanche – Pay more in interest with this method than the Debt Avalanche – Ignores interest rates which can tack on more debt to the larger loans

The Debt Avalanche Explained

The Debt Avalanche is mathematically the best way to pay off debt. It focuses on paying off debt the quickest but requires a substantial amount of discipline. 

How The Debt Avalanche Works

– List out all your debts in order of interest rate – Start with the largest interest rate down to the smallest interest rate – After the debts are lined up, pay the minimum payment on all debts except for the one with the highest interest rate. Pay the highest interest rate debt off first as fast as you can – As the highest interest rate debt is paid off, move to the next one and so on until you have paid off all the debt

Advantage Of The Debt Avalanche

– The quickest way to pay off debt      - By eliminating high-interest rates first, it cuts down on the amount of debt being added to the other loan     - Saves you money in the long run     - Provides a clear plan on how to get out of debt Perfect for people who are disciplined and don’t quit easily

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