Clare Louise
Debt snowball and debt avalanches are popular methods to pay your debt. In the case of the avalanche strategy, you will settle the high-interest debt first. Meanwhile, the snowball method will focus on paying the smallest debt first.
These methods have some similar approaches, such as listing down your debts. After that, you need to start paying one debt after the other. This should be done until you settle all your debt. You might choose one among them depending on your circumstances and preference. This blog post will explore both of these methods in detail. I will help you understand which one is right for you. Please keep reading.
Debt avalanche
This method requires you to pay the minimum payment on all outstanding debts. And paying the high-interest bill with your extra money. In my opinion, this method will help save most of the interest amount.
Debt avalanche pros and cons
This method can save you money and time. However, it has its downsides. You should be disciplined to gather an extra amount to pay a particular debt. This method will not be effective if you lose your motivation in between. Even if you drop this strategy, it will not benefit you.
The debt avalanche method will assume you have a flexible amount to pay your debt. In cases where your daily expenses are on the rise, you will not be able to move forward with this approach. You might also have to stop utilizing this approach.
Advantages
[1] This method will help lower the amount of interest you will pay.
[2] The debt avalanche method will also effectively reduce the time needed to get out of debt.
[3] This approach is the right match for people with a budget-oriented approach.
Disadvantages
[1] This method will not be effective if you are not disciplined and committed.
[2] The debt avalanche method assumes you have a particular flexible amount.
Debt snowball
With this approach, you will pay the smallest debt first. After that, you will move to the bigger ones. In my opinion, this strategy will focus on settling on the smallest job first.
Here is how to reduce your debt:
Start by listing all the outstanding amounts you owe in ascending order based on their size. After that, target the smaller debts and pay them first. You should allocate as much extra money as possible to pay these smaller debts. Meanwhile, you should also focus on paying the minimum payment of the remaining bills. From my understanding, this approach is helpful for someone facing multiple loans. This method will boost your confidence by paying smaller debts, which are easier to pay.
Debt snowball pros and cons
This method will build your motivation. With this approach, you will pay the lowest debt first. This will create a sense of accomplishment. Plus, you will see faster results.
With this strategy, the reduction in interest will not be the same as the debt avalanche method. You will have to pay more interest than the avalanche method.
Advantages
[1] This method will motivate you to pay your debts more quickly.
Disadvantages
[1] The debt snowball method will not reduce interest as much as the avalanche method.
[2] This approach can take a longer time to become completely debt-free.
Bottom lines
Choosing between these debt management methods depends on your situation. The debt avalanche approach will save money on interest rates. This strategy focuses on paying debts with higher interest first. But it requires you to make flexible payments. On the other hand, the debt snowball method will build your motivation by paying the smallest debt first. However, this method may cost more in interest. I suggest you pay the debt consistently, whichever method you use.
