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Debt Snowball vs. Debt Avalanche...How to Achieve a Debt Free Life
June 13, 2017
When Americans get serious about tackling their debt, they are leaning towards two different methods, Debt Snowball or Debt Avalanche. Although there are other methods out there, these two methods are the most common and practical. Not only are the easy to understand and follow, they actually work!
Keep in mind that paying off debt is a difficult task to achieve. It not only takes patience and time, but diligence to stick to method you choose for the long haul.
The Debt Snowball method involves you writing down all of your debt from the smallest to largest balance. You must pay the minimum on all of your debt to avoid penalties and late payments which would in turn increase your debt if they are unpaid. In the Debt Snowball, you concentrate on paying off your smallest debt first. Once that is achieved, you take the payment you were making on that debt and apply it to the next smallest debt. You continue to do this until you are debt free.
The reason many Americans use the Debt Snowball method is that it provides emotional wins that keep them motivate while paying off long term debt. For many Americans, paying off a debt is a huge accomplishment. These accomplishments help build confidence on being able to stick to their debt reduction plan. This plan is all psychological and the little emotional wins keep people going from debt to debt.
The Debt Avalanche method involves you listing your debts from highest to lowest interest rates regardless of the balance. This method will take you the shortest time to pay off your debts while saving the most money in interest. You must pay the minimum payment for all of your debts, just like in the Debt Snowball method. You will concentrate on paying off the highest interest rate debt first. Like in the Debt Snowball, when the first debt is paid off, you will apply that amount to the next highest interest rate debt.
The Debt Avalanche method makes the most sense financially and mathematically, but can be difficult because it may take longer to see your accomplishments. Many Americans that choose the Debt Avalanche method must have more willpower to continue the debt reduction plan. In some cases, their higher interest rate debts are also their higher balances. This can cause Americans to have to work harder and longer to pay their debt off. However, it will save them the most money with regards to interest payments in the long run.
If you are looking to achieve a debt free life in the shortest, least expensive way then the Debt AValanche method is the best options for you. However, if you need to see achievements and results to stay motivated then the Debt Snowball method will keep you motivated to stay on track. Regardless of what method you choose, stick with it. If you can find a plan to tackle your debt that you can follow then you will achieve your goal of being debt free. There are always roadblocks that come up, but, if you can commit to paying off your debts, you can reach a debt free future.