If you’ve recently started your journey to a debt-free life, you have probably done a lot of research for the best ways to pay off debt. Two common methods you might have found are the debt avalanche and debt snowball methods. While both are useful strategies for achieving a debt-free life, one method may work better for you and your debt situation.
The St. Louis Debt Expert is here to lay out all the details and assist you in deciding which strategy will be best for your goals.
There are commonalities shared between the methods, for they both require you to make a list of all your debts, then make the minimum monthly payments on all except one. What’s the difference? In the debt avalanche method, you pay extra money towards the debt with the highest interest rate and then work your way down. In the debt snowball method, you pay extra money monthly towards the debt with the lowest balance and then work your way up.
The debt avalanche method requires you to make minimum payments on all debt, and then use the remainder of your money to pay off your debt with the highest interest rate. Once that debt with the highest interest rate is paid off, you begin putting the leftover money towards the debt with the next highest interest rate and so on.
This strategy will save you the most money in interest, and make your money go the furthest. Here’s an example to show you how this would work! Imagine you have the following debts:
- $12,000 student loan at 7.00%
- $9,000 credit card debt at 5.00%
- $6,000 car loan at 4.50%
In this example, the avalanche method would have you pay off your student loan first, and then pay off the debts with lower interest rates. The snowball method would have you pay off the car loan first. The snowball method could allow you to become debt-free in the same amount of time as the avalanche method, but in the end, you would have paid more money because of interest building up.
I’m sure you’re now wondering why anyone would use the debt snowball method if the debt avalanche method saves time and money! Well, the advantage of the debt snowball strategy is that it builds motivation to pay off your debt and this is sometimes the most important factor for individuals. This strategy requires you to pay off your smallest amount of debt first, so you will see results a lot quicker!
It’s not easy to stay motivated and excited about paying off debt. At times it can feel like you’re just throwing money at them without seeing any progress. If you are a results-driven individual who needs motivation, the debt snowball method is ideal for you!
Whichever strategy you decide to use, make sure that you consider your personal behavior and if seeing quick results is something you desire. The most important part is that you get started!
If you are still unsure, hesitant, or lost as to where to start, hire an expert to help you! The St. Louis Debt Expert can help formulate a strategy specifically for your situation, answer questions at any time, and work through those motivational issues with you!
Call us today so we can listen to your story and give you a free consultation! (636) 223-5900