Debt Snowball, Avalanche, or Consolidation – Which One is Best for Debt Elimination
If you are currently in debt, you are probably looking for a way out. Fortunately, you have several options: snowball debt, debt avalanche, and debt consolidation loans. In this article, we’ll cover what each is and their respective pros and cons, so you can choose the one that best suits your financial needs.
What is the debt snowball method?
Debt snowballing is a debt repayment method that prioritizes paying off smaller amounts of debt first. You will continue to pay the minimum amounts on all of your debts to avoid late fees or damage your credit card, but any extra money will go directly to the smaller debt. Once that is paid off, you will focus on the second smallest debt, etc.
Pros and Cons of the Debt Snowball
The debt snowball is very motivating and well suited for people who need the extra encouragement to pay off their debt. However, since you are focusing on the smallest debts rather than the highest interest rates, you might not save that much money overall.
Best for: People who need an extra dose of encouragement to finally cross the finish line debt free.
What is the debt avalanche method?
The Debt Avalanche Method is a repayment method that first focuses on eliminating debt with the highest interest rates. You will still be making all of your minimum payments, but instead of the smaller amount, you will be spending your extra money on debt with the higher interest rate. Once this is fully paid off, you will move on to the second highest interest rate, and so on.
Advantages and disadvantages of the debt avalanche
The debt avalanche method is the best way to save the most money overall because you will be saying goodbye to those high interest amounts. However, paying off these debts can take some time, which can be daunting for some.
Best for: People who want to save that money and scrap those high interest payments.
What is debt consolidation?
Debt consolidation involves combining multiple debts into one payment which ideally has a lower interest rate. With a debt consolidation loan, you will transfer multiple debts to a single monthly payment with a fixed repayment period.
Pros and Cons of Debt Consolidation Loans
Debt consolidation loans usually have lower interest rates than credit cards, so you can save money. They also make it easier to pay bills, since you only have to worry about one payment per month.
Best for: People who want to make paying their bills easier and saving money at the same time.
Conclusion: which one is right for me?
The best debt elimination strategy is the one that best meets your financial needs and, ultimately, one that you can stick to. Whether you need to pay off your own Oprah debt (debt snowball), a way to ruthlessly save money (debt avalanche), or a method to make paying your bills less of a nightmare. , We have what you need.