Winter weather is right around the corner, and many in Long Island may be looking forward to the silence and stillness that a peaceful, new snowfall brings. But, for some individuals in Long Island struggling with debt, it may feel like they are caught in a financial blizzard that they cannot see their way out. Fortunately, there are two nods to the season that could help debtors wrest control of their finances: a “debt snowball” and “debt avalanche.”
With the “debt snowball,” the debtor first pays off the debt with the smallest balance, and then moves on to the next smallest balance and then the next until all debt is paid off. A benefit to this method is that seeing successes helps debtors keep the momentum going. Moreover, with smaller debts out of the way, it frees up more income to attack larger debts.
In the “debt avalanche” method, the debtor first pays off the debts that have the highest interest rates, effectively meaning they tackle the most expensive debts before tackling less expensive debts. This helps save the debtor money in the end because they will ultimately be paying less interest. However, debtors may not receive the immediate gratification they may experience in the “debt snowball” method.
There are advantages to both the “debt avalanche” method and the “debt snowball” method for getting out of debt. And, keep in mind that if one’s debts are simply too much to handle, even with a method in place for paying them down, one may find that filing for bankruptcy is an option for debt relief. Through bankruptcy, debtors can address their debts and find the fresh start they need to move forward.
Source: Money.Mic, “Snowball vs. Avalanche: Here’s the best strategy to get out of debt,” Anna Bahney, Nov. 10, 2016