Debt Avalanche Versus Debt Snowball

Our society talks about the weight of debt, but there’s not a lot of talk about overcoming it. I’m here to add to the conversation. There are two great methods for paying off debt. Both options give you a bit of control, organization, and most importantly they help you see results. One is not   better than the other – what matters is how they may fit your specific situation and your perspective on financial wins.

So, when reading this think about your situation, and maybe it will prompt you to do some reevaluating. Both the avalanche and snowball method can help you start a journey toward financial wellness, without being overwhelmed.

*Keep in mind when looking at these methods that mortgages loans are not included. Not because they are not a debt, but because mortgage loans are long terms and can take decades to pay off and not everyone plans to stays in their home until the mortgage is paid in full.*

Debt Avalanche: repayment option that focuses extra financial resources to the highest interest rate debt payments first. Then it works down the line in descending order of debt interest rate. If you’re willing to be disciplined – this may be the perfect fit.

  • Pay the minimum required for all loans, use available funds to make extra payments to highest interest item first
  • Main asset: Helps you reduce some long-term high interest (lower overall
  • Main flaw: Doesn’t yield quick reward
  • Good for people with high interest loans

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Debt Snowball: repayment option based on paying minimums and paying extra on the smallest debt, then when the smallest debt is paid off, start paying off the next debt with the smallest balance.  If you need some motivation this can be a good option for you.

  • The idea is that while paying the minimum owed on all debts you also pay off the lowest balance debt quickly and then move on to paying more than the minimum on the  next smallest debt and so on.
  • Main asset: You can start knocking out small pieces of debt + see the results of your effort quicker
  • Main flaw: You end up paying more in interest (higher overall payments)
  • Good for people who need a bit of encouragement or a push to start

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My own method is to use both. When I began tackling my finances,  I only had student debt in the form of multiple loans. I used a mix of snowball and avalanche. I paid more than the minimums, and once I had the loans more manageable I started allocating additional amounts to higher interest loans within my collection of student loans. So, don’t feel limited you can use both as well!

Both options can be a good plan for anyone who needs to pay off debt but always consider your complete financial situation, including making sure you have an emergency fund for unexpected expenses and speaking with a tax or financial advisor about your individual financial situation. Taking the first steps can feel hard, but the reward is worth it. Which method better fits your situation? What first steps will you take?