What’s The Best Way To Get Yourself Free Of Debt?
Everybody’s ideal is to be free of debt, and there are many different ways to try to accomplish this. Two of the most effective ones are the debt snowball method and the debt avalanche method. You might think, with the snow references, they are pretty similar, but actually they approach the problem from two different angles. If you’re trying to get yourself debt-free, see below to decide which method might suit you best.
Focus on the smallest
The snowball method isn’t complicated. All you need to do is make sure you make minimum payments on all of your loans, but whichever account has the lowest balance, that’s the one you direct any additional funds towards. Once you pay that off, start working on the new lowest balance account, and work your way up.
See quick results
The snowball method is great for people who want to see results quickly. Many people find continuously paying but seeing little movement discourages them. If you target your lowest loan, you could get it paid off quickly and that will motivate you to move onto the next one. It’s quite exciting to actually be able to just dismiss one debt and know that it’s out of your life forever – if you can do it with one, why not all of them?
Focus on the most expensive
The avalanche method has something in common with the snowball method in that you focus on one account, but in this case you focus on the account on which you’re paying the highest interest rates. Do the same as with the snowball method, i.e., pay all your minimum monthly payments, and then use all extra cash to pay more on the account with the highest interest. Clear that account, and move on to the next highest rate.
Greater savings
The avalanche method is perfect if you want to pay off your debt without losing lots in interest payments. By focusing on your highest interest rates to start with, the biggest fees go first. It may not be as quick as the snowball method, but it could be more profitable in the long term.
Either way, you’re a winner
The snowball method and the avalanche method both have their points. Neither is to be preferred, it just depends on what the person you are. If you like to see quick results, you will probably prefer the snowball method. If you are a bit more patient and want to save money in the long term, even if you don’t see results straight away, the avalanche method would suit you. Choose the method you prefer, and start working towards a debt-free life!
