Debt Snowball vs. Debt Avalanche
Advantages of the Debt Snowball
This payoff technique is a great way to keep yourself in the game psychologically as well as financially. If you focus on playing down the smallest accounts first, you will be able to quickly get rid of some of your bills such as credit card debt. However, larger debts such as student loans will remain on your books for a long time accumulating interest.
If you have a steady source of income that you feel will remain steady for the next few years, you should be focusing on reducing the total amount of creditors on your books. You may be able to afford the organizational advantages that the debt snowball provides you are the expense of leaving bigger accounts alone. It is a Great way to keep from missing bills and being charged late fees and penalties from overlooking a mailing or missing a digital alert.
Advantages of the Debt Avalanche
The avalanche is a great way to pay down your debts if you are looking to get rid of large accounts such as your student loans first. This can be a great way for people to keep their head in the game by reducing the total amount of debt quickly. The Avalanche is a great way to proceed for people who do not have a large number of creditors, rather, they have sizable debt interspersed between a small number of creditors.
The Avalanche is great for reducing the amount of time that you are paying down debt. If you are not sure that you will have the same source of income in five years, then this may be the strategy for. It pays down interest more quickly so that you can free yourself to open up new avenues of income without having to worry about incurring late fees and penalties.
Advantages of Other Strategies (Debt Consolidation)
Both of the above strategies are ways to organize your debt if you have multiple creditors. However, it may be advisable to simply consolidate your debts into a single creditor so that you do not have to live by your debt payoff planner.
Debt consolidation may be an option if you are looking at a default at one or more of your debtor accounts. If you have a large amount of credit card debt or other unsecured debt that is in danger of ruining your long-term finances, you may want to adjust your debt payoff planner to include this strategy.
Most debt consolidation is only available for people who are in more serious financial trouble. For instance, many consolidation firms have a minimum of $10,000 that you must be in debt before they will qualify you for their program. Consolidation also ends up costing more than either of the previous two strategies; however, you will receive the best deal on your monthly payments.
Photos by HikingArtist
17 Comments
Submit a Comment
Is Financial Independence Your Goal?
Financial Independence. Retire Early. If you've spent any time researching personal finance, you may have come across these terms, or the combined term - FIRE. When you first see them, they may seem far-fetched, or even completely unachievable. But today is...
read moreThe Three Reasons People Don’t Want to Budget
Back when I was healing my own relationship with money, I encountered all sorts of resistance from others any time I mentioned budgeting. "Eh, I have enough money, I don't need to track it." Or on the other side: "I don't have enough money to budget." "Budgeting...
read morePick One Thing and Work On It
I've worked with clients for a while now, and one thing I see over and over again is overwhelm. Our lives are so complicated, juggling family, work, leisure time (if we're lucky!) a second job or business, kids, unreasonable customers... I don't need to tell you this,...
read moreAre You Afraid To Look At Your Debt?
In my last post I wrote a bit about changing our perceptions about the inevitability of debt, but today I want to talk about a common problem people have with debt: Fear of looking at your debt. When you can't look at your debt, it is impossible to do anything about...
read moreThe Bank Of Mom And The Bank Of Dad
As I have been working with the great people at Debt Payoff Planner, we have been having fun looking through data. One thing they pointed out to me was some interesting statistics relating to family loans. Often these loans are from a parent, which isn't surprising,...
read moreIs Debt A Universal Constant?
Debt is a universal constant, never to be escaped and never to be changed, like Death and Taxes, right? Over the years, I’ve noticed that there seems to be a large group of people out there that accept debt as a constant in their lives that can never be eliminated. “Well, that’s just the way it is, right? I have to get a loan to get a car. And by the time I pay this one off, I’ll need a new car, with a new loan.” But is that really true? Is debt really inevitable?
read morePersonal Loans: Tips for Keeping the Peace When Things Don’t Go As Planned
Many of us have official obligations like credit card debt and less formal debts to friends or family members that include personal loans. Usually, one of these personal loans isn't structured by a formalized loan agreement, but it can be equally important to your...
read more6 Mistakes to Avoid When Paying Down Your Debt
Are you saddled with student loan debt? Does your credit card debt keep growing? Getting out of debt, and staying out of debt, can be a very difficult process. Yet, it is one of the most important things you can do to set yourself on a strong financial foundation and...
read moreShould I Transfer My Credit Card Balances: Benefits and Risks
When you have a large balance on a credit card, it might be worth thinking about transferring the balance to a different card. In this article, we will discuss the pros and cons of doing just that. It's an option that can help people get out of debt, but you need to...
read moreDebt Consolidation Loans: Good or Bad?
Have you recently found yourself drowning in auto loans, student loans, and credit card debt? You're not alone. Millions of American consumers are having trouble with paying their monthly credit card bills because they've gotten overextended, recently lost their job,...
read more
Our team is dedicated to providing up-to-date financial information to help people manage their debt. Our goal is to improve mindset, reduce guilt, and deliver actionable information. We are not financial professionals and the information we've provide should not be considered official advice.
Facing a debt crisis and having to start again at my age (49) is very challenging. I am stunned at some of the fundamental lessons I seem to have missed but I am also lucky enough to be earn a very decent salary.
Your accompanying thoughts and advice mean so much.
Thank you.
This app is a massive help, both practically and mentaly, if your in depth try it.
If all my interest rates are the same should I pay highest debt first 6,890 at 23% instead of snowball especially if they are card’s I intend to keep. I have cut the rest up anyway and the rest I can payoff easily if I get this massive monthly debt gone first
List all debts smallest to largest. Pay off smallest debts first. You will have sense of accomplishment. Don’t focus on interest rates.
This is a great spp
That’s the best app so happy colours and bright. So helpfull
Facing a debt crisis and having to start
again at my age (49) is very challenging. I am stunned at some of the fundamental lessons I seem to have missed but I am also lucky enough to be earn a very decent salary.
Your accompanying thoughts and advice mean so much.
Love the app!
I really like how this app gives you multiple strategies to help you figure out what will benefit you the most.
I got about $55000 I need to work through and for the first time i feel like I have a clear way to work it down.
Thank you so much for this app! I have a path which I can follow and now, i can see the light at the end of the tunnel! Thank you!
Nice app
The idea of having less accounts to pay monthly is encouraging. We sometimes miss payments because of the number of payments we have to make monthly. This app helps a lot with keeping track and knowing exactly how much to pay for each account.
I have been looking for this took for several months. Finally one that is user friendly and colorful! I printed and out ok n a big poster board . A head on accident outnua I. Major debt at age 54 and 60. Now we can head into retirement debt free as ournfirstplan was thank you!
If I have extra money that I can put half in savings and use the other 1/2 on a credit card which card do I pay it on first? Highest or lowest balance or highest apr. it is not enough to pay off any 1 all together
I pay on the smallest balance first. Getting it paid off quickly really helps my moral!
Thank you so much for this tool! Unfortunately this is my second time in depth. The first time It took me a little over 10 years to consolidate 20.000 euro of depth. I wish I had your tool 16 years ago. This time it will take me a little over 1 year to consolidate a dept of 20.000. I’m so happy! Not because I’m in dept of course ;). But because, thanks to your app, I have a plan and strategy. At this moment I’m studying to become a budget coach so I can give back to society by helping others. Is your tool also available for companies? Where I can have access to more than one account at the time? Or do I have to open an account for each of my clients? Thanks you so so much. And I love the new changes you guys made recently! Good luck with all your endeavors!
I absolutely love this app! It’s a sensible and practical approach to paying debts. Thank you so much!