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Debt snowball and avalanche: How are they different from one another?

January 17, 2013

Are you suffering from excessive credit card debt? If yes, then you must know that such problems arise when you have multiple credit cards and you use them all at the same time. Coming out of credit card debt is necessary if you want to lead a debt free life. It is generally seen that credit card debt problems can be eliminated with the help of suitable debt relief options such as credit card consolidation, debt settlement or credit counselling. However, you need to know that there are other methods too that will help you wipe away your debt problems. Amongst these are debt snowball and debt avalanche. Read on to know how these methods may help you solve your debt problems.

Debt snowball method

While trying to eradicate your credit card debts, you should first try to pay off the debts that have high interest rate. According to this method, you should pay off your low interest rate debt at first. The benefit of starting with the debt that has low rate of interest is that you can pay it off quickly. The money that you were paying towards it can be used to repay the debt that has low interest rate and is next on your debt list. When you manage to pay off the debts soon, you’ll feel encouraged towards the goal of repaying your debts. You will not find any interest if you do not see fruitful results after you pay a lot towards the debt with the maximum interest rate. As such, this may dishearten you and you may stop making the debt payments.

Credit Card Debt Repay (Snowball Vs Avalanche)


Debt avalanche method

In a debt avalanche method, you pay off the debts at first that have the high interest rate. You should target the credit card debt that has the high interest rate. You make the minimum payments for all the debts but make more than the minimum payment towards the debt that has the highest rate of interest. After you pay off this debt, you should ponder on the next debt that has the high rate of interest. Under this method, you pay off the debt that has high interest rate. As such, the amount you pay goes towards paying the interest with little payments towards the principal. This is the reason why the outcome comes much later and your motivation level seems to be very low.

It completely depends upon your debt situation as to which option you may choose. Apart from credit card consolidation, debt settlement and credit counseling, both debt snowball and avalanche helps you eliminate your credit card debts. If you have outstanding debts that are of the same rate of interest, then it is better that you choose the snowball method. On the other hand, if you have high and low interest rate debts as, then you should choose the avalanche method to solve your debt problems. Which ever method you may opt for, it will help you reduce your debt problems so that you can lead a debt free life. Find more on this topic

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