HomeHome SearchSearch MenuMenu Our productsOur products

Paying off debt: Snowball vs. Avalanche method

by , 25 November 2014

So you've decided it's time to get rid of the debt that has been piling up. Good for you! Making the decision to tackle your debt is an important one.

The next step would be to decide on a debt payment method. You may be familiar with the two popular debt pay-off strategies: Snowball and Avalanche.

Today we’ll take a closer look at both of them to better understand what they entail and which method is best suited to your needs and mentality.
The Snowball method
The Snowball method refers to paying off your smallest balances first and relies on instant gratification as a motivation factor. You will be paying the minimum on all debts and focus on paying off the debt with the lowest balance.
This is a great method to choose if you usually lack motivation and can’t stay focused on long-term financial goals because it builds up your confidence and encourages you to be more responsible with money.
The Avalanche method
The Avalanche method refers to focusing on paying off the debt with the highest interest rate and paying the minimum on the rest. After you’ve finished paying off the debt with the highest interest rate, you move onto the next-highest rate interest rate debt and so on.
This strategy allows you to save more money because you pay off the highest-interest debts first. Not only that, but it also helps you save time because you avoid accruing interest on your high interest debts.
Which strategy should you choose?
That largely depends on your discipline when it comes to financial issues. The Avalanche method will cost less over time but you have to remain motivated until the end. The Snowball method is a better choice for people who can’t stay focused on a goal and can’t delay gratification. However, you don’t have to choose one method – you can combine them. For instance, you can start by paying off the debt with the lowest balance, then move to paying off the highest-interest debts.

Now is the right time to buy properties on auction
Many homeowners can't afford to keep up with their bond payments thanks to the latest interest rate hikes... And economists expect even more hikes over the next two years. That means there’s an oversupply of properties which means one thing – Bargain properties on the market!
And now is the perfect time for you to get in on this action. To find out how you can buy cash positive investment properties selling at significant discounts right here in South Africa, click here.


Paying off debt: Snowball vs. Avalanche method
Rate this article    
Note: 5 of 1 vote

Related articles

Related articles

Trending Topics