How does debt snowball work?
Debt snowball is the strategic option where you are required to:
1. List down the debts in an ascending manner, starting from the smallest debt owed by you
2. You will have to make regular payments on the smallest debt, and go on making minimum payments on the other debts in the list
3. You will have to go on making the payments on the debt with smallest amount till it gets paid off in total
4. After the smallest debt gets paid off, tick it off from your list and start off with the same process, with respect to the other debts in the list
5. You will have to go on with the same process, till all of the debts get paid off one by one
How does debt avalanche work?
Debt avalanche is the strategic option where you are required to:
1. List down the debts in the descending order, starting from the debt with the highest interest rate
2. You will have to make regular payments on debt first in the list. In this case too, you will have to go on making minimum payments on the other debts in the list
3. Just as in case of snowball, in this process too you will have to on making the regular monthly payments on the debt which has the highest interest till it is paid off in total
4. After you are done with the highest interest rate debt, cut it off from the list of the debts and follow the similar process till all of the other debts get paid off too
Difference in between the two options
The main difference between the two options is that snowball is mainly concerned with the credit card debt amount. On the other hand, avalanche concerns the credit card debt which has the highest interest rate. For some of the debtors, paying off debts as fast as possible gives satisfaction and immediate release from stress. For some others, paying off the debts which have high interest rates is more suitable.
Snowball aims at chipping off small debts while avalanche just as the name suggests, aims at bringing down large amounts. Debts with high interest rates are highly unmanageable and pose as greater problems. Therefore, you can opt for one or the other depending on how you mange debts, and which would be more beneficial for you. You will first be required to determine your affordability, and in addition your mentality too.
If required, you can also consult with a credit counselor or take online help from any good credit card consolidation company to repay your credit card debt in a proper way, which can help you determine as to which strategic debt pay off option may be of more helpful for you. To know more about credit card consolidation you can visit here ......