There are a lot of different methods people use when it comes to paying off their debt. Some people prefer the avalanche method, others like the debt snowball method.
What’s the difference between these two? And which one is the best for you? In this blog post, we’ll talk about the debt snowball method in depth and help you decide if it’s the right choice for you!
When dealing with debt, it can feel a little overwhelming. Especially if you are only ever paying the minimum amount due each month, as you won’t ever tackle your debt.
Deciding to tackle your debt head-on is the best way, and let’s take a look at the debt payoff methods available. Keep on reading to find out more…
What Is The Debt Snowball Method?
The debt snowball method is a debt payoff method where you focus on paying off your smallest debts first, while still making the minimum payments on your bigger debts.
Once your smallest debts are paid off, you “snowball” that money into your next smallest debt, and so on and so forth until all of your debts are gone.
Meaning you’re tackling your personal loans, outstanding debts, credit cards and improving your financial situation.
Why Does The Debt Snowball Method Work?
The debt snowball method works because it helps to keep you motivated. When you see those smaller debts being paid off quickly, it can help encourage you to keep going and pay off the rest of your debt!
How To Do The Debt Snowball Method
Now that we’ve talked about what the debt snowball method is and why it works, let’s go over how to actually do it.
First, you need to list out all of your debts, from smallest to largest. Make sure to include the interest rate, balance, and minimum payment for each debt.
Then, you’ll want to create a budget and make sure you’re still making the minimum payments on all of your debts except for the smallest one. For the smallest debt, you’ll want to pay as much as possible until it’s paid off.
Once that debt is paid off, move on to the next smallest debt and do the same thing! Keep going until all of your debts are gone.
Why You Should Try The Debt Snowball Method
If you’re looking for a way to pay off your debt quickly and stay motivated along the way, the debt snowball method is a great option!
It can help you get out of debt fast and give you the extra boost you need to keep going.
Let’s say you have the following remaining debt:
|Debt Name||Debt Balance||Interest Rate||Minimum Payment Due|
|Credit Card A||$500||15%||$50|
|Student Loan B||$15,000||5%||$250|
|Credit Loan C||$18,000||4%||$400|
Your minimum payments would be $700 per month. However, with the debt snowball method, you would focus on paying off Credit Card A first.
So, you would make the minimum payment on Student Loan B and Car Loan C ($700 total) and then put any extra money towards Credit Card A.
Once Credit Card debt A is paid off, you would “snowball” that $50 payment into the next smallest debt, which would be Student Loan B.
So now you would be paying $300 towards Student Loan B and $400 towards Car Loan C each month.
You would continue this until all of your debts are paid off! This ‘snowball’ debt repayment method is a great way to pay off debt quickly and stay motivated along the way, whilst paying off each credit card one-by-one.
What is the Debt Avalanche Method?
The debt avalanche methods are a debt payoff method for your outstanding debts where you focus on paying off your debt with the highest interest rate first, while still making the minimum payments on your other debts.
Once that debt is paid off, you “avalanche” that payment into your next highest interest rate debt, and so on and so forth until all of your debts are gone, as a debt consolidation.
Why Does The Debt Avalanche Method Work?
The debt avalanche method works because it saves you money in the long run. By focusing on paying off your high-interest debts first using the minimum monthly payments, you’re able to save money on interest and get out of debt faster!
Is the Debt Snowball Method Better, or is the Avalanche Method Better?
There is no “right” answer when it comes to the debt snowball method vs. the avalanche method – it all depends on what debt repayment plan works better for you!
If you need a quick win to keep you motivated, the debt snowball effect method might be a better option. However, if you’re looking to save money in the long run, the avalanche method might be a better choice.
Both paying off debt methods can work well – it’s all about finding what works best for you and your situation! Try out both methods and see which one helps you get out of debt faster.
Whichever method you choose, make sure to stick with it until all of your debts are paid off. It’s definitely a good idea to try either method, rather than sticking to your monthly minimum payment plans.
So, what are you waiting for? Give the debt snowball method a try today! You might be surprised at how quickly you can pay off your debt and how good it feels to be debt free, and to start saving money.
Using the debt snowball paying off debt methods, it’ll help you with staying focused and motivated in tackling the outstanding balance you have with your credit financial products, and allow you to achieve financial freedom.