Is it your daily routine to calculate how much you need to repay on your unsecured debt but you cannot make up your mind as to which debt relief option will be most suitable to you? If you want to repay your debts all by yourself, then you can choose among debt snowball or debt avalanche strategies. Here are the steps which you need to follow if you choose debt snowball and/or debt avalanche as your preferred debt relief option.
Debt avalanche - The steps:
- List your debts from the highest interest rate to the lowest one.
- Make minimum payments on all except on the highest interest debt.
- Pay as much as you can on the highest interest debt. This means the minimum payment plus the amount you've been able to save in that month.
- As soon as you repay the highest interest debt, repeat the steps till you've paid the entire outstanding balance.
Debt snowball - The steps:
- List your debts from the smallest outstanding balance to the highest one.
- Make minimum payments on all except on the lowest balance.
- Try to pay as much as you can on the lowest balance debt. Make sure you pay more than the required minimum monthly payment.
- Go on repeating this step with the next debt on your list after pay off the previous one.
Though both debt snowball and debt avalanche help you repay debts, if you analyze mathematically, then debt avalanche will help you save some more dollars since you're targeting the highest interest debts first. This is because usually the monthly payments are more on the highest interest debts. So, by paying off the highest interest debts, you're saving yourself from paying the highest monthly payments for more days. Moreover, it becomes quite easier to repay the smaller debts and you can repay them fast, too.
While choosing between snowball and avalanche, keep in mind that you can use both the strategies to get out of debt. Are you thinking how it's possible? Yes, not only it's possible but also it can be quicker to solve debt problems as well as staying motivated till the end. For example - If you have too many debts, you can at first decide to pay off 2-3 smallest balances and then target the highest interest one. However, it depends upon you how you want to prioritize your debts; but, one thing you should keep in mind - stay motivated till you pay off the last cent.