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5 Scenarios and solutions to repay the last cent by using snowball and avalanche

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By: tiarajoseph11
on 10th May,2017

It is always better to pay off your debts all by yourself without any professional help.
5 Scenarios and solutions to repay the last cent by using snowball and avalanche

It is always better to pay off your debts all by yourself without any professional help. By doing so, you can save the money that you otherwise need to pay to an organization and also you can repay your debts at your own pace. Here are 4 scenarios and solutions from which you can select one that resembles your current financial status, and can follow the specific strategy to get out of debt completely.

Scenario 1: Every month you check your credit card statements and see that you're paying quite a lot towards the interest. So, you want to get rid of your debts really fast in order to save money.

Solution 1: Since the outstanding credit card balance is calculated on the basis ofcompound interest, it becomes quite difficult to repay the debt when the interest rate is quite high and you continue making minimum payments on your bills. So, it is better to repay the highest interest rates first in order to benefit you financially in the long run. So, in this case, applying debt avalanche method to repay debts on your own is perhaps the solution for you. It becomes easier to repay the last debts as you go down the list since the interest rate is lower and you can put more money towards paying them off.

Scenario 2: You have quite a few unsecured debts to pay off. You have tried to repay them on your own but you lack motivation since you think it'll take quite a long time to pay them off.

Solution 2: If you lack motivation, then debt snowball method can be the best option for you. This is because you'll repay your lower balance debts really fast and thus you can remain easily motivated, as you can see the result of paying off debts one by one. This will help you target your higher balance debts since the outstanding balances are usually higher on relatively higher interest debts, since every month the interest adds up with the remaining balance.

Scenario 3: You have several bills to pay off and you want to stay motivated and repay the last debt in your list. You have a stable income and you think you can save a good amount every month after meeting your daily necessities.

Solution 3: In this situation, when you can contribute a significant amount every month towards getting out of debt, you can combine debt snowball and avalanche together. To do so, you can divide your debts and apply debt snowball to pay off the list of debts with the lowest balance and apply avalanche method to start paying off the higher interest debts. What you can do is, after making the minimum payment on all debts, divide the additional amount in two and make extra payment towards paying off the debt with the smallest balance and the one with the highest interest rate. After you repay one debt, try the method with the next one in your list. By doing so, you can stay motivated as well as repay debt fast and save money in the long run.

Scenario 4: Amongst your debts, some are of really low balance while some others have lump sum outstanding balance. You have a stable income but now you can't save much but you're sure to get an increment in some months of time.

Solution 4: Since you have some bills with low balance, it will benefit you if you target these debts first and thus choose debt snowball method. Moreover, since your income is not enough to make more payments towards paying off debts, you can start repaying your debts with the lower balance ones. However, when you have relatively higher income, choose debt avalanche strategy to pay off debts fast and save more money.

Scenario 5: You are aware of debt snowball and avalanche and you can motivate yourself to repay till the last cent. However, you cannot decide which one will help you financially in the long run.

Solution 5: If this is your situation, then you must know that debt avalanche can benefit you financially more in the long run. This is because since you're targeting your highest interest debts first, you are paying of a high interest debt; so, you are actually saving money on the interest payments, since the interest is calculated on every month's outstanding balance.

In all the above situations, the basic thing is you need to budget and save money so that you can contribute more dollars towards paying off the bills. So, save money, choose debt option(s) that's best for you and take control over your financial life the way you want.

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