Debt Snowball vs. Debt Avalanche: no, this is not a Canadian ice hockey team match. They are well-known methods of paying off debt.

If you’ve come this far, you must wonder: which is the best? Read this article to find an answer, unlike anything you’ve ever read on this subject!

We are looking at two of the favorite methods of paying off debt. Both share something in common that made them so famous: practicality.

To use them, you don’t need knowledge of finance or mathematics. Also, with these, the question, “which bill should I pay now?” stop existing.

In effect, you will always know what the next step is. In both methods, you will have the order to make payments.

The big difference between the snowball and avalanche methods is the criteria to decide which bill you should pay first.

This may seem small, but it makes all the difference. Below, learn more about each method and its main advantages and disadvantages.

The snowball method is known to generate “small rewards” early in the account liquidation process.

Only those with many bills will know how rewarding it is to get rid of at least one. Thus, even the smallest bills generate joy and a sense of accomplishment.

To generate this stimulus, the snowball method recommends prioritizing smaller debts.

To apply it, just organize your bills from the cheapest to the most expensive. Next, remove them in exactly that order.

That’s without forgetting to make the minimum payments on all other accounts. Below, check the pros and cons of using this method.

The avalanche method is another way to say “goodbye” to your bills. You’ll also need to settle your debts, but with different criteria to make payments.

This method prioritizes accounts that charge higher interest rates. After all, the higher the interest rate, the more your debt will tend to grow.

So that’s exactly what we want to avoid, isn’t it? Therefore, you should order your debts from the highest interest rate to the lowest interest rate.

After that, just pay them in the sequence you’ve already defined. Finally, don’t forget to make the minimum payments on all other accounts that are in order.

See how this method can help you. Also, know the disadvantages of relying on it.

As you can see, there isn’t a “debt snowball vs. debt avalanche” rivalry. These are methods that, like everything else, have positives and negatives.

So, to find the best method, you should consider the pros and cons of each and choose the one that makes the most sense.

However, whichever method you choose, here’s a tip that can help you greatly.

It’s not always a good idea to blindly follow one of these methods. Thus, there is a way to know if you should continue with the method as it is or prioritize a specific account.

If you use the avalanche method, average the value of your debts. Some online calculators can make this task easier.

If any accounts have a cash value greater than 2x the calculated average value, you should prioritize them.

However, if you choose the snowball method, average the interest rates on your accounts. If any account has an interest rate twice the average, prioritize it.

These tips will prevent you from accumulating very large debts or interest rates that can make your debts grow inordinately. After each month, repeat it!

Lastly, if you need a household budget never to have to worry about a snowball or an avalanche again, we’ve got you!

Maintaining this type of control is simpler than you might think!

Just read the article below and understand everything you need to know about it.