Debt snowball vs. debt avalanche: The best way to freeze debt

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There is a misconception that debts need to be gotten rid of with counseling or debt consolidation training. This could not be more untrue. Credit counseling or debt program might be the plans you'll pick to get rid of your debt, there are other debt consolidation plans you can try. They're easy, free and known to work.

The most commonly talked about debt reducing methods are snowball and avalanche. With the snowball plan, focus on paying off debts one debt at a time, from smallest to largest. With avalanche plan, pay debts off one at a time, beginning with the highest interest.  


The Debt Snowball vs. The Debt Avalanche

The snowball was introduced by Dave Ramsey, and goes against the obvious benefit of getting rid of high interest bills first, but claims you should start paying off debts with small balances to create momentum. The advantage of paying off your lowest debt first, is you'll pay it quickly and can use the money saved towards your next debt. These results help to motivate you.

First, create a list of your debts, beginning with the smallest balance. Pay back the minimum amount to all of your debt, excluding the first debt, which you should pay as much as you can each month until it is paid.

Once an account is paid, use the money used to pay that debt, and use it to pay the next debt's minimum payment. The amount you put toward debts gets bigger like a snowball gathering momentum. 

The debt avalanche method is similar to the snowball debt plan, except you pay debts from highest interest to lowest. Mathematically, you'll save money in the long run when your higher interest debts are paid off first. When your debts have similar interest rates, it doesn’t much matter.

What the avalanche debt plan is lacking is the fast benefit given with the snowball debt method. If your debt with the highest interest is also your largest balance owed, it can take a long time to pay off the first debt. Getting out of your debt needs discipline, and it may be discouraging.