Debt elimination: The Snowball, Avalanche and Consolidation methods

How to gain some momentum and pay off those pesky loans 

Debt can help us do everything from buying that perfect car to getting that dream house. But if we take on too much debt, it can make us feel like we’re constantly trying to keep up and catch up. 

If things start to feel that way, there are some debt elimination strategies that could make life feel a whole lot saner. Check out these three to find one that best suits you. 

Snowball Method 

The gist

With the snowball method, we line up our debts – from smallest to largest - and start knocking them out one by one.   

How it works

Say you’re making minimum payments on some of your debts. Put extra effort into paying off the smallest debt first. Then, when that’s paid off, we take the money we were paying towards it and add it toward the payment for the next one. Keep doing the same thing right down the line, snowballing the amount we can pay as we eliminate each debt one by one.  

The snowball debt elimination method is empowering. Each debt we successfully knock out gives us more momentum for eliminating the next one and has us feeling the awesome power of our debt-crushing snowball. 

Who it’s for 

The snowball method is for those of us who know that quick wins will keep us motivated to keep knocking out that debt.  

Avalanche Method 

The avalanche method is for those of us looking for the most efficient way to eliminate our debt.  

The gist 

The avalanche method helps eliminate debt by organizing our payments based on interest rates. Just like an avalanche, this method will help sweep away our debt from top to bottom. Plus, it’s going to help us by starting with the debt that will cost us the most, saving us money in the long run.  

How it works 

Take a look at the terms of all of those loans you’re paying off. List each of them starting with the highest interest rate to the debt with the lowest. We’ll start by focusing first on paying off the highest interest rate. Once we’ve done that, the money we were paying towards it will go to the next highest one, and so on and so forth.

Who it’s for 

This is the strategy for those of us who are more analytical and want the most cost-efficient way to eliminate our debt.  

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Excited smiling man putting up two fists

Debt Consolidation Method 

The gist 

Making multiple loan and credit card payments can be stressful. The debt consolidation method combines all our debts into one payment, making it more manageable and potentially more cost-effective to pay off. 

How it works 

We take out a debt consolidation loan that combines all our debts into a single loan payment. Not only is it simpler, it could also lower the interest rate we’re paying. 

Who it’s for 

Consolidation is ideal for those of us who are making minimum payments on a bunch of different loans and credit cards.

Debt doesn’t have to dominate your life. With these three strategies, you can save some time, money and stress just by changing your approach and mindset. Check out our Financial Health Hub for more resources on borrowing smart and paying down debt.

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