Eliminating debt 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
When to File for Bankruptcy
If you have a mountain of debt that you are struggling to pay, these repayment strategies may still feel too overwhelming. In some cases, filing for bankruptcy is the best way to take control of your financial situation. Here are some signs that you should file for bankruptcy:
- You’re at risk of foreclosure
- Your liabilities exceed your income
- You don’t have any savings
- You’ve already tried negotiating
Get Legal Help Today
Don’t let your life become bogged down by unmanageable debt. If you’re struggling to make ends meet because of debt, it may be time to contact a legal expert who can help you assess your options. That’s where the trusted attorneys at OlsenDaines can help. Our team has over 40 years of experience serving Oregon and Washington, and we strive to make it easy for you to get back on your feet. To get started, schedule a free legal consultation today.