Being realistic, it’s worth to say that many consumers today live in debt. And sooner or later they make a decision to change their life into the better and to start debt elimination. But it’s never an easy process. Lots of people hesitate to start it because they just don’t know what to do and where to start from. There are 2 popular methods for getting out of debt – debt avalanche and debt snowball. But how to choose the one which will suit for you personally? At first, it’s necessary to analyze your current situation to understand how many debts you have, what debts have high interest and which ones have low interest rate. Consider all the pros and cons and do your best to make a really effective decision.
This way to get out of debt is about paying off your smallest debt first and step by step moving to your higher debt. It suits for consumers who aren’t confident enough that they are able to pay down their whole debt. In other words, it’s relatively an easy way to start because paying down the smallest debt, for example some loans, often seems not so hard. You should pay most of your attention and efforts to paying down small debts but at the same time it will be necessary to pay minimum on the rest of your debt.
This method is an opposite to the debt snowball and requires you to pay off your highest interest loan first. Then you should continue your debt elimination process by paying down you next highest interest debt and end up with paying off the smallest one. As same as with the snowball method, you should make minimum payments on your other debts while you’re focused on paying down the high interest one.
How to Make a Right Choice
Everything depends on you and your personal financial situation. If you want to reduce a harmful impact of your debt on your financial life then consider choosing the debt avalanche. In case you will pay down your highest interest debt then you will save money. But this way for getting out of debt has an aggressive character so you should be financially and morally ready to start debt elimination from paying down the most expensive loan.
If you’re not ready for though changes or doubt that you can pay down your debt completely, then it’s better to use the debt snowball. Start from eliminating your smallest debt and you will get more confident in your repayment abilities. This method suits for those who want to get quick results. As only you will see the first result it give you a motivation you for becoming debt free and getting financially independent.