Avalanche vs. Snowball: Which is the Better Way to Pay Off Debt?

by Washington Federal Team on April 9, 2012

By Guest Blogger, Diana Degarmo

Debt avalanche and debt snowball describe strategies through which you can work better on debt management. These are the two most common methods that people follow to get out of debt. Both of these options not only help you in easing the debt pay off process, but they also help you pay off your debts faster.

Choosing between debt avalanche and debt snowball methods.

Debt avalanche is the method in which you pay off the debt with the highest interest rate first. Debt snowball is when you pay off the smallest debts first.  

When deciding which method is the best for you, it is important to look at the variables of your debt situation. Each method depends on the debt type and debt amount as well as the mentality of the debtor. For example, if your debt amounts are large, debt snowball is the best option to choose. On the other hand, if you have multiple debts with high interest rates, debt avalanche would be the smartest option.

Another thing to take into consideration is how much money you want to save in the long run so that you pay less interest over time. If you want to pay off debt at a faster rate and also save money, it would be better to use the debt avalanche method. However, if you do not have enough money to make large payments, it may be better to opt for the debt snowball method.

After deciding which method is best for you, follow the steps below to get the best end result.

Debt avalanche:

  1. Make a list of the debts that you have in a descending order, starting with the highest interest rate.
  2. Focus on making extra payments on the debt that is first on your list.
  3. In addition to making a larger payment on the first debt in the list, you will also want to make minimum payments on the other debts listed.
  4. After completely paying off the first debt on your list, repeat the process starting with the second debt in the list which now has the highest interest rate.

Debt snowball:

  1. Make a list of the debts that you have in an ascending order starting with the smallest balance.
  2. You will want to make a larger payment on the first debt in the list.
  3. Along with making a sizeable payment on the smallest debt, you will also have to make the minimum payments on all other debts included on your list.
  4. After completely paying off the smallest debt, you will want to follow the same process with the second debt listed, which now has the smallest balance.
  5. Your goal is to recognize which method will work best for your financial situation and make a solid commitment to getting out of debt for good.

Diana Degarmo is a guest blogger who specializes in writing on debt management. Follow her on Twitter and find her on Facebook.

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