Making the decision to get out of debt can be daunting, but it’s important to have a plan in order to achieve your goal. There are two main methods for getting out of debt: snowball and avalanche.

Both have their pros and cons, so it’s important to understand the differences before you choose a method. We compare factors of the snowball and avalanche methods to figure out which one is right for you.

What Is The Debt Snowball Method?

The debt snowball method is a debt reduction strategy where you pay off debts in order of smallest to largest, regardless of interest rate. The idea is that paying off smaller debts first will give you a “snowball” of extra money that you can put towards your larger debts.

This method can help you stay motivated to pay off your debt, as you’ll see progress being made more quickly. There are a few different ways to set up your debt snowball.

You can either make the minimum payments on all of your debts except for the one with the smallest balance, or you can put all of your extra money towards the debt with the smallest balance until it’s paid off. Once that debt is paid off, you would then focus on the debt with the next smallest balance.

The debt snowball method is a great way to pay off debt because it’s simple to understand and easy to stick to. If you’re feeling overwhelmed by your debt, this method can help you get out of debt quickly and efficiently.

Debt Avalanche Method

The debt avalanche method is a strategy for paying down debt that involves focusing on the debts with the highest interest rates first. The idea behind this method is that by tackling the most expensive debt first, you can save money on interest and get out of debt more quickly.

To use the debt avalanche method, you will need to list out all of your debts from highest interest rate to lowest. Then, you will focus on making the least possible payments on all of your debts except for the one with the highest interest rate.

For that debt, you will make extra payments until it is paid off. Once the most expensive debt is paid off, you will move on to the next most expensive debt and so on until all of your debts are paid off.

One of the advantages of the debt avalanche method is that it can save you money on interest over time. By focusing on the debts with the highest interest rates first, you can pay less in interest overall. This can help you get out of debt more quickly and save money in the long run.

Another advantage of this method is that it can help to keep you motivated. When you see your debts shrinking and disappearing one by one, it can give you a sense of accomplishment and keep you motivated to stay on track.

The debt avalanche method may not be right for everyone, but it can be a helpful tool for getting out of debt. If you are struggling with high-interest debt, consider giving this method a try.

Should I Use The Debt Snowball Or Avalanche Method?

The answer depends on several factors, including your overall financial situation and your psychological makeup. Let’s take a closer look at each method to see how they work and what their pros and cons are.

Snowball Method: Pros And Cons

The main advantage of this method is that it can give you a quick sense of progress and momentum, which can keep you motivated to keep paying off your debts. The main disadvantage is that it may not be the most efficient way to pay off your debts since you’re not necessarily targeting the debt with the highest interest rate.

Debt Avalanche Method: Pros And Cons

The advantage of this method is that it saves you money in interest charges over time. The disadvantage is that it can take longer to see results, which can be discouraging if you’re trying to get out of debt quickly.

Final Notes

Which method is best for you? It depends on your individual circumstances. If you need a quick boost of motivation, the debt snowball method may be the way to go.

If you’re looking to save money in the long run, the debt avalanche method may be better for you. Ultimately, the most important thing is that you make a plan and stick to it. Whichever method you choose, just make sure you stay focused on your goal of becoming debt-free.