Debt Payoff: Avalanche vs Snowball
There are two main methods of debt payoff: Avalanche and Snowball. When you think of an avalanche or a snowball, snow comes to mind, but what does snow have to do with debt?
In the south, snow causes panic as people deplete stores of bread and water, cities shutdown, and no one can drive. Debt can have a similar affect on people, causing them to panic. Once you enter debt payoff, it feels like building a snow man as you piece together your masterpiece.
The Avalanche method is the strategy to payoff debt in descending order of interest rate (highest interest first). This method is based on paying the lowest amount of interest. Like an avalanche, this method is slow to build up (see progress) and then suddenly it happens (debt paid off).
The Snowball method is the strategy to payoff debt in ascending order of balance (lowest balance first). This method is based on small wins to stay motivated and feel accomplished. Like a snowball, this method starts small. As you roll it through the snow (pay off debts) it grows (shows progress) quickly.
In comparison, the avalanche method will usually give you the shortest term and lowest interest paid. While the snowball method is the easiest to follow due to seeing initial results quicker from tackling the smallest debt first. No matter which one you choose you’ll reach the end goal of paying off debt.
Be WIZE with MONEY