Two Debt Pay-off Methods: The Snowball and the Avalanche

Imagine you have a family of five and you’re struggling to make ends meet financially. It can be so tempting to charge something on a credit card so you can put food on the table one week. However, if this becomes a habit your debt problems can snowball fast.

If you’re in a situation like this, you probably want to know how to reverse the situation. There are two great debt-payoff strategies that don’t involve bankruptcy. These methods might work for you depending on your situation. They’re called the “snowball” and the “avalanche.”

The snowball debt payoff solution

The debt snowball involves paying as much as you can to your credit card with the smallest amount of debt on a monthly basis. Even as your credit card balance declines, you will continue to pay that same amount.

Eventually, more and more of that payment amount will go to paying principal and less will go to paying interest. Once one credit card is paid off, you can move on to the card with the next-smallest amount of debt.

The avalanche payoff solution

This involves paying as much as you can against your card with the highest interest rate first. By targeting your high interest card first, you’re eliminating the most expensive debt the fastest. Pretty soon, you’ll be paying more and more money to the principal debt and eventually the debt will disappear. You can now apply the freed up capital to the card with the next-highest interest rate.

The primary difference between the snowball and the avalanche is the fact that the avalanche targets the highest interest rate cards. The snowball targets cards with the smallest balance so you can have that sense of achievement sooner.

Need help evaluating your debt resolution strategies?

Not all bankruptcy lawyers will be oriented strictly toward bankruptcy. Indeed, the best law firms will review all the debt resolution strategies available to you, and advise you of the best next steps to take toward getting your financial situation under control.