Which Debt Payoff Method is Better: Debt Snowball or Avalanche?
NEW YORK, September 18, 2020 (Newswire.com) - Finding the right debt repayment strategy can be stressful. No matter how much you read up on popular methods like debt snowball and debt avalanche, it can be difficult to decide which is right for you.
To figure out which method will work best, you first need to consider your circumstances, goals, and motivations.
Debt snowball vs. debt avalanche
Regardless of the method you choose, the main goal is paying off your debt. But you’ll have to ask yourself, How do I want to get there?
Each method involves making the minimum monthly payments for all your debts, while focusing extra money on a specific balance until it’s completely paid off, one at a time. Many experts also advise putting aside at least $1,000 for emergencies before starting to knock off your debts.
Since the debt snowball method prioritizes your smallest balances then moves toward larger debts, you benefit from small, early victories — which serve as motivation to continue paying off your higher balances. However, while you’ll likely keep the snowball moving, you may end up paying more in total interest over the course of repayment.
With the debt avalanche method, you prioritize your debts from highest to lowest interest rate. Once you pay off your debt with the highest interest rate, you move on to the next highest, until you’re debt-free. This means you’ll save money on interest over the course of repayment, however it may be harder to stay on track. The avalanche method takes patience and optimism.
Which debt payoff method is right for me?
If you want to see progress immediately and have a variety of smaller balances to pay off, the debt snowball method may work better for you. This is especially true if you feel overwhelmed and discouraged by your debt.
If you have higher balances but are hopeful about paying them off, you might want to consider the debt avalanche method. Plus, it’ll help you save money on interest in the long run.
There are also plenty of other factors that can help you decide between the two strategies.
Both debt snowball and avalanche are useful approaches to paying off your debt, each with their own set of pros and cons. But you don’t need to stick to one method — you can always change your strategy based on what’s working for you.
Categories: Personal and Family Finances