This time of year many people are reviewing their finances in preparation for the holidays. For many, this means looking for ways to eliminate debt which can feel like an overwhelming task – especially without the right plan in place.
Thankfully, there are many different repayment strategies that you can choose in order to begin rapidly paying off your balance. Two of the most popular and effective debt repayment plans are known as the “snowball” and “avalanche” methods. While these tactics are similar, they have some key differences that can help you decide which strategy is best for you.
What is the Snowball Method?
With the debt snowball method, you pay off debts in order of smallest to largest balances. By putting the majority of your money toward loans with smaller balances and making minimum payments to all other debts, you can swiftly cut through your debts. This method is popular because it is easy to implement and provides quick results, which is great for building momentum and motivation.
What is the Avalanche Method?
In the debt avalanche method, you pay off loans based on interest rates. By targeting loans with higher interest rates first while making minimum payments to any other debts, you can quickly pay off debt while cutting down on the amount of interest you pay over time.
Though this tactic is great for eliminating debt quickly and with the least amount of interest, it is a little more difficult to implement and keep up with. The debt avalanche method also produces slower short-term results, which may be challenging for individuals who struggle with motivation.
Which Debt Repayment Method is Best?
Unfortunately, there is no “one-size-fits-all” plan when it comes to debt payment plans. It all comes down to which plan you can feasibly implement and keep up with – after all, no plan is useful if you won’t be able to stick to it. To help you determine which tactic may be better for you, here are some pros and cons of both debt repayment strategies:
- Eliminates debt faster
- Reduces total interest paid
- More difficult to implement
- Takes more time to see results
- Produces results quickly
- Builds motivation and momentum
- Takes more time to eliminate debt
- Requires you to pay more interest
If you have a mountain of debt that you are struggling to pay, these repayment strategies may still feel too overwhelming. If that’s the case for you, it may be useful to contact a legal expert who can help you assess your options. That’s where the trusted professionals at OlsenDaines can come in handy! Our experienced attorneys are trusted all throughout Oregon and Washington. We are dedicated to helping you get your life back on track. Call us today for a free consultation!