The debt avalanche and the debt snowball are both approaches to pay off debt with the goal of being consumer debt-free. In this post, I want to share with you what each method is to help you decide which approach you want to take to pay off your debt.
What is the Debt Avalanche Method?
The debt avalanche method is simply paying off your loans starting with the highest interest rate first. Any extra money you are applying to debt would go towards the loan with the highest interest rate, while making minimum payments on the rest of your loans. As you pay off one loan, you focus your extra payments on the next highest interest rate, and so on.
Since you are paying off the loans with the highest interest rate first, you will be paying less interest overall. If you work at the same momentum, is likely that you will pay off debt quicker than the snowball method. The downside is if your loan balances are large, it is easy to loose motivation.