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How to Pay Off Debts: The Snowball vs. the Avalanche Method


A man carrying a mountain on his back, labeled "Debt"

If you’re struggling to pay off debts, the first thing to remember is you’re not alone. Millions of people around the world are also working to eliminate debts of their own. While it can seem daunting to start tackling debt and regain control of your finances, there are time-tested strategies to paying down debts in a structured and rewarding way. In this post, we’ll explore two of the most popular methods: the snowball method and the avalanche method.


The Snowball Method


The snowball method is a debt repayment strategy that focuses on paying off your smallest debts first, then working your way up to your largest debts. Here's how it works:

  1. List your debts from smallest to largest balance.

  2. Make the minimum payment on all of your debts except for the smallest.

  3. Put as much money as you can towards paying off the smallest debt.

  4. Once the smallest debt is paid off, take the money you were putting towards that debt and apply it to the next smallest debt.

  5. Repeat until all of your debts are paid off.

The idea behind the snowball method is that paying your smallest debts first gives you a quick win and motivation to keep going. As you pay off each debt, you'll have more money to put towards the next one, even more towards the one after that and so on. Over time, you'll gain more and more momentum and be able to pay off larger and larger debts.


The idea behind the snowball method is that paying your smallest debts first gives you a quick win and motivation to keep going.

The Avalanche Method


The avalanche method is a debt repayment strategy that focuses on paying off your debts with the highest interest rates first. Here's how it works:

  1. List your debts from those with the highest interest rate to the lowest.

  2. Make the minimum payment on all of your debts except for the one with the highest interest rate.

  3. Put as much money as you can towards paying off the debt with the highest interest rate.

  4. Once the debt with the highest interest rate is paid off, take the money you were putting towards that debt and apply it to the next highest interest rate debt.

  5. Repeat until all of your debts are paid off.

The idea behind the avalanche method is that paying off your debts with the highest interest rates first saves you the most money in interest charges over time. By focusing on your high-interest debts, you'll be able to pay them off faster and put more money towards other financial obligations.


The avalanche method is a debt repayment strategy that focuses on paying off your debts with the highest interest rates first.

Which Method is Right for You?


Both the snowball and avalanche methods are effective ways to get to your end goal — being debt free — but they do work differently. The snowball method is best for people who operate best with quick wins and need help with the motivation to keep going. Meanwhile, the avalanche method is best for those who lose a lot of ground on high-interest charges and want to save the most money possible over time.


Ultimately, the method you choose will depend on your personal preferences and financial situation. If you have a lot of debts with high interest rates, the avalanche method is probably the best option to start giving your finances more wiggle room. If you have smaller debts that you can pay off quickly, the quick wins of the snowball method might look more appealing.


No matter which method you choose, the most important thing is to start paying off your debt as soon as possible — with dedication and commitment, anyone can become debt free and find financial security and peace of mind.


 

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