Introduction – What is a Snowball or Avalanche?
With debt snowball, the individual makes minimum payments on all accounts and pays as much as possible to the account with the lowest balance. The goal is to pay off this one account first and then tackle the lowest balance.
With debt Avalanche is opposite, the individual pays makes minimum payments on each account and pays as much as possible on the loan with the high interest rates. The goal is to pay off the loan with the highest interest rate and then once that is complete tackle the one with the next highest interest rate.
Debt Snowball vs. Debt Avalanche – Which One Should You Choose?
-It is a psychological tool used to help people stay motivated during repayment.
– This method of payment is often used for people who have low balances but high interest rates. You save more money on the Avalanche method as you are not paying too much money out in high interest rates.
How Much Faster Will You Be Able to Pay Off Your Debt with an Avalanche
On the face of it the Avalanche method mere appear that it is taking a long-time to clear the debts but the reality is that you are saving more money by paying the loans off with the higher interest rates. This money can then put forward to pay off other loans.
The snowball method may be quicker but it depends on the person’s motivation if they get excited once they see a debt has been cleared then they may become even more motivated to pay off the debt quicker.
In conclusion, there are some circumstances where one of these methods may be preferable over another depending on how much time or energy you have left in a day or project, but they both have their strengths and weaknesses.