The Debt Avalanche vs. The Debt Snowball: Weighing the Two Methods 

When it comes to debt management or paying off your debt, there are a lot of debt methods available. Each comes with its upsides and downsides. All you need to do is smartly pick one that suits your needs.

Knowing the debt plan you choose inside out is imperative. In this article today, I’m going to highlight two of the best debt plans for you so that you know everything about them before you pick one. Let’s get this started:

The Debt Avalanche

In the debt avalanche method, you pay the minimum on all your debts. The amount you’re left with at the end of the month goes to the debt with the highest interest rate. This way, all your debts keep moving and you remain getting ahead of the process.

The best thing about the debt avalanche method is that it considers your interest rate. However, it requires you to have a significant amount of money in your bank account to get started. Without the money for minimum debt payments, it’s not impossible to follow the debt avalanche method.

Thus, when following this method, you need to ensure that you have a substantial amount of money coming in every month. If anything, the debt avalanche method requires a disciplined approach. In case you fail to give it the consistency it needs, it will fail altogether.

The Debt Snowball Method

In the debt snowball method, you start by paying off the smallest debt. Wait… What does it mean? It means the debt with the minimum outstanding payment. Once you get done with it, you move on to the second smallest.

This way, you move into ascending order and keep paying off your debts until you have nothing pending. Although this method keeps you motivated throughout the process, it leaves the interest rate behind.

That’s right, guys. It doesn’t address the most crucial issue, which is the interest rate. The interest fee adds to your debt and sometimes, it nearly doubles it. It holds especially true in the case of credit card debts.

Weighing the Debt Avalanche and the Debt Snowball

Now that you know what each debt method offers, let’s see which one is better for you. If you have a debt with a higher interest rate or multiple debts like that, the debt avalanche method is right for you. On the other hand, if you have different small debts and the interest rate isn’t a big problem, the debt snowball method would work well for you.

However, one thing that both these debt plans need is commitment. You need to stay committed to the process until you get done with your debt and this is where most people fail. It is one reason I prefer the debt snowball method over the debt avalanche method.

When you get done with one of your debts, even if it’s the smallest one, you get motivated to pay off the others. It provides you with instant gratification, which is not possible with the debt avalanche method. Thus, it’s the best option for all the impulsive souls out there.

The Bottom Line…

Choosing a debt plan can affect your financial life significantly. Therefore, you must make the right decision. Please research thoroughly before you take your pick of the litter. I wish you good luck!

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