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To have peace of mind in your financial well-being, it’s essential to pay off your debt. When paying off debt, a couple of popular methods you can choose from are the snowball and the avalanche.

Bestselling author Jason Vitug wrote “You Only Live Once.” He explains the differences between both payment methods and how you can find out which one could work best for you.

Avalanche Payment

According to Vitug, the debt avalanche method targets debt with the highest interest rate first – regardless of the size of your credit card balance.

“Once you’ve paid off the debt with the highest interest rate, you move on to the one with the next highest rate,” says Vitug. “You apply all prior payments from the paid-off debt to the next debt, essentially creating an avalanche.”

Listed below is Vitug’s breakdown on how the avalanche method works:

  1. List all of your debts, starting with the balance with the highest interest rate and continuing in descending order.
  2. Focus on repaying the debt with the highest interest rate first, while making minimum payments on the other debts.
  3. Apply the payments from the first debt (now paid off) to the next debt, and so on.

Snowball Payment

Unlike the avalanche method, you choose to pay off the smallest debt balances first with the snowball method.

“Once you’ve paid off the smallest debt, you then apply those payments to the next smallest, and so on,” says Vitug. “You’ll eventually have more available money to pay toward the larger debts.

Below is Vitug’s breakdown of the snowball method:

  1. List all of your debts, starting with the one with the smallest balance.
  2. Focus on complete repayment of the debt with the smallest balance first, while making minimum payments on your other debts.
  3. Apply the same payments you made on the first debt (now paid off) to the next debt, and so on.

“Think of your increasing payments as a snowball that grows as it goes down a hill, adding more snow,” says Vitug.

Best Payment Method For You

According to Vitug, the avalanche method might make the most financial sense for you. This is because you’re prioritizing paying off your debt with higher interest rates, and higher rates ultimately cost you more.

“As I’ve discussed previously, debt elimination has a lot more to do with your mindset than with the numbers themselves,” says Vitug.

In contrast, the snowball method might not make the most financial sense for you. Vitug claims that larger balances may be accruing more interest, meaning you’ll end up paying more overall.

“However, this method is best for those who are motivated in this way,” says Vitug. “As the snowball increases in size, the excitement builds, and the momentum continues to grow.”

If you’re having a hard time trying to decide which method to choose, realize that you’re not limited to only one method. You can try both to see what works best for you.

“The best method for you to use is the one that motivates you the most,” said Vitug. “Choose one method first, and if that doesn’t seem to excite you about repaying your debt faster, choose another method.”

Whether you choose to pay off your debt with an avalanche payment or a snowball payment, the bottom line is – you’ll eventually be debt free.

Have you had experience with either snowball or avalanche payment methods? Leave us a comment!

This Post Has 4 Comments

  1. My current situation is like this.. my auto loan has super high interest because I needed a vehicle and was financed when my score was low. Problem I have is I can not refinance because the vehicle is not worth what I owe! My DTI is high because I am struggling with high rent payment..ridiculous auto loan payment and I have a personal loan plus credit cards. I make all my payments on time but I hate the struggle! I would love to buy a home instead of renting but because of my aforementioned issue, I’m not quite sure as to how it’s possible. Do you have any suggestions? Thanks

    1. Hi Deanna:

      You’re going to have a hard time getting approved with a really high DTI. As a first step, I’m going to suggest you check out Rocket HQ. You can pull your credit for free without affecting your score. You’ll also get tips on how you can improve. That said, it’ll help if you pay down your credit card debt because that’s high interest. Once you get those paid off, you can work on repaying your auto and personal loans. Once you get your debt down to a manageable level, it’ll be much easier to get approved. Hope this helps!

      Kevin Graham

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