Debt Reduction: Snowball vs. Avalanche

Author: Tammy Doss

I bet you were guessing this was a winter extravaganza and the information contained here would be about a good time in the middle of winter with a fun snowy snowball fight or an avalanche of fun opportunities for you to enjoy.   Well, sorry to burst your bubble.  It will be a good time to look seriously at the melting of debt.

The Snowball Method is a payment strategy where you focus on paying off your smallest debt first.   It doesn’t matter what the interest rates are.  The focus here is to pay off the smaller debt balance and then move on to paying off the next debt with the smallest balance.  Once each of your smaller debts are paid off the idea is to take those monthly payment amounts and put them towards the greater balances you owe.  Eventually you would be debt free by paying off each smaller balance and putting more towards the greater balances on credit cards, student debt or other incumbrances.

The Avalanche method is a payment strategy where you focus on paying off your highest interest-bearing accounts first and eliminate the interest debt you incur each month.  With this method you pay down your high interest-bearing accounts at an accelerated pace while still making your lower interest-bearing account payments at the minimum payment rate.  Once you eliminate the higher interest accounts you are saving money and have more to pay towards your lower interest credit cards, Student loans or other incumbrances.

Both methods have pluses and minuses.  However, if you are working towards getting out of debt take notice and advantage of either strategy or investigate more in-depth information on how to get yourself on the right side of debt.

Look forward to a bright and colorful SPRING once you take the first step to eliminating that cumbersome debt and enjoy the freedom of feeling free and debt free.

Best wishes from The Job Shop as you navigate your own personal freedom from debt.