Debt Snowball vs. Debt Avalanche: What’s the Difference?

How to Get a Debt Consolidation Loan With Bad Credit

Most people fail when trying to get rid of their debt because they don’t follow a structured and proven method towards managing their debt. If you want to trim down your debt, you need to follow a debt repayment strategy that will help you pay off all your debts gradually.

Two of the most common methods include the debt snowball method and the debt avalanche method. If you want to learn more about these methods, you should stick around because mentioned below is a detailed explanation of both methods and how they differentiate from each other:

What is the Debt Snowball method?

In the snowball method, you start by paying off the smallest debts first while maintaining minimum monthly payments on all the other debts. You start at the smallest debt and move on to the next smallest and so on until all your debts are paid off.

With the snowball method, the amount of money you save starts to increase with every debt you pay. One of the best things about the snowball method is that It gives you a chance to get rid of your debts regardless of your financial situation.

All you need is to direct the major chunk of your money towards paying off the smallest debt and maintain minimum payments on other debts until you have successfully paid all your debts off one by one.

What is the debt avalanche method?

In the debt avalanche method, you start by targeting the debts with the highest interest rates first and slowly work your way down one by one. The idea is to get rid of the debts that are causing the highest amount of financial stress and get rid of them as soon as possible.

Using the avalanche method saves you the most amount of money in interest fees that you can use to pay your bills or double down on the remaining debt repayments.

Key differences between debt snowball and debt avalanche method:

The snowball and avalanche methods both are very effective when it comes to debt repayment. However, there are a few notable differences that you should keep in your mind. The snowball method is much easier to start.

It is because it requires you to focus on the smallest debts first. Whereas with the avalanche method you hone in on the debt with the highest interest rate which requires a lot more money. So, if you are already in an extremely bad financial situation the snowball method will be the right option for you.

On the other hand, the avalanche method is much faster at getting debt out of your life. It starts saving you a considerable amount of money very soon. Whereas, the snowball method takes time to gain some momentum.

In Conclusion:

Whether you prefer the snowball method of debt repayment or the avalanche method you need to make sure to identify your plan early on so you can take a structured approach from the get-go. This is going to save you a lot of time and help you get rid of your debts much more quickly.