When it comes to paying off debt there are two very well-known methods, the snowball method and the avalanche method. While the Snowball method focuses on paying off the smallest loan first, the Avalanche method tackles the loan with the highest interest rate first.
Both methods require you to have a clearly defined budget, a list of all your debts, and the focus of attacking one loan at a time.
What is the difference?
The avalanche method will knock out the debts with the highest interest first. This will lead to less payments and ultimately less money coming out of your pocket in the long run. However, this also means it could be an exceptionally long time before you start to see the number of loans you have diminish. It can be hard to keep putting in the work month after month only to keep the same number of loans.
The snowball method is fantastic for keeping the momentum going and having a feeling of accomplishment. You will pay off the smaller debts faster meaning you can cross off entire debts from your list. Each time you payoff a debt, it will lead to a mental boost and satisfaction. But, since you are not prioritizing the interest rate, it can cost you more money and time in the long run.
Getting out of Debt is Not a “One Size Fits All”
There really isn’t a “perfect” way to attack a large amount of debt. The most important step is just to start as soon as possible and keep working towards becoming debt free. You might find that a mix between the two methods will work best for your own situation. Take the route that is going to work best for you. And remember, this isn’t a quick process. Paying off your debt is a process that will take years of hard work and determination to make it a priority month after month. It will be worth it in the end, I promise!
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