Sick and tired of staring at a mailbox full of unpaid bills? Looking to finally achieve debt-free living? You may want to consider using the debt avalanche method. In this article, we’ll explain what the debt avalanche is, the pros and cons of using it, how it differs from the snowball method, and other debt payoff methods you can consider.
What is the debt avalanche method?
The debt avalanche method is a debt repayment strategy that prioritizes paying off your highest-interest debts first. You’ll still make the minimum payments on the rest of your debts to avoid dinging your credit score or incurring late fees, but you’ll put any money left over toward the debt with the highest interest rate. Once that’s paid off, you’ll focus on paying off the second-highest interest rate. You’ll continue this pattern until you’re completely debt-free.
Pros and cons of the debt avalanche method
Using the debt avalanche can help you save money since you’re kicking those high-interest rates to the curb first. And as you eliminate these debts, you’ll find yourself with extra cash left over to put toward your debt. However, the debt avalanche method isn’t particularly motivational. It may take a while for you to notice progress, so you need to stay committed for the avalanche to work.
Is it similar to the debt snowball method?
The debt avalanche is similar to the debt snowball method in that you pay minimums on all of your debts. However, it’s different in that the debt snowball focuses on first paying down the lowest balance amount, followed by the second-lowest balance amount, and so on. The debt snowball is better for people who need to feel more encouraged while paying off their debt. However, the debt avalanche method is better for saving more money overall. To each their own.
Other debt payoff methods
Here are some other debt repayment methods you should consider:
With a balance transfer, you move your existing balances to a new credit card with a low or 0% interest promotional period. By paying off your debts during this introductory period, typically 12-18 months, you’ll save money. Note that you’ll need a good credit score to qualify for a 0% interest card and you may need to pay a balance transfer fee.
You could also consolidate your credit card debt with a personal loan. Personal loans typically have lower interest rates than credit cards, so you’ll be able to save money. Plus, they can be easier to qualify for than balance transfer cards.
Debt management plans
With a debt management plan, you’ll work with a nonprofit credit counseling agency to consolidate your debts into a single monthly payment and negotiate a lower interest rate. Note that it can take three to five years to become debt-free with this method.
The debt avalanche method can help you erase your debt, but you also have plenty of other debt payoff options. Don’t wait; the best time to get started paying off your debt is today!
Stefanie began her career as a journalist, reporting on options, futures, and pension funds, and most recently worked as a writer and SEO content strategist at a digital marketing agency. In her free time, she enjoys teaching Pilates and spending time with her daughters and Siberian Husky.