Posted on: Mar. 25, 2017 in Credit, Debt, Money

There are some ways to get out of debt that don’t take lots of time. You could win the lottery or inherit money from some long, lost relative, but what's the chance of that? The best way to do it is tackle it little by little, dollar by dollar. But where to start when you have multiple cards and loans and things seem out of control? The two most popular methods for reducing debt are known by their snow-related names: snowball and avalanche.


The snowball method was made popular by finance guru Dave Ramsey. The approach is simple. You list out all your debts in order from the lowest balance to the highest. Each month, you’ll make the minimum payment toward every balance except on the debt with the lowest amount owed. On that debt, you’ll pay every cent you can squeeze out of your budget. Once it’s paid, you’ll tackle the next lowest debt by paying the monthly amount you were paying before plus whatever else you can afford. The trick is that you’ll have the money you were paying to that first debt available to roll into this next debt, allowing your payments to “snowball” and grow as time goes on.

This method is great for building confidence because you’ll quickly eliminate smaller debts. However, because your high-interest cards may not be the ones with lower balances, it can take you longer to eliminate all debt and you may end up paying more in interest charges.

The avalanche method takes the opposite approach. Here, you’ll list your debts in order of the highest interest rates to the lowest. You’ll pay the minimums on all debts except the one with the highest interest rate. There, you’ll give it all you’ve got. Once it’s paid, you move on to the next.

The methodology here is simple: The longer you carry a balance on a debt with a high interest rate, the more you’ll end up paying over time. Even if you don’t charge anything else to those cards, the balances will still grow. Your credit card statement will likely have an example of how long it will take you to pay off your current balance if you pay on the minimum or a higher amount. That number should give you some motivation. Use this method if you have the patience to stay committed because you’ll save money in the long run. It’s more of a slow and steady wins the race method, but it will get the job done.

Whether you choose to snowball or avalanche, getting out of debt will feel great. It will also improve your credit score and open a world of financial possibilities.

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