The best way to get out of Debt? Debt SnowBall Vs. HIgh Interest
Hello ladies and gentlemen, today I wanted to discuss the topic of debt, and more importantly how to get out of it fastest. Many people all over the world collect debt in one form or another. In fact in America alone, the total credit card debt has racked up to 1 trillion!
DEBT SNOWBALL METHOD
Essentially the debt snowball method focuses on paying off the lowest credit card debt first, then proceed to the next smallest debt.
HIGH INTEREST METHOD
This method is much like it sounds, you simply pay the highest interest debt first, then proceed to the next highest interest rate debt.
In both of these methods, I'm assuming you pay the minimum payment on all other cards, then put the most amount of money you can to pay off the debt of choosing depending on method chosen. The reason you put the most amount you can towards the debt is so you don't have to pay as much in interest in the long run.
Many people may argue one way or another on this. The most common rebuttal of the Debt Snow Ball Method is that if you always choose the smallest debt and pay it off first, you will end up paying more in the long run due to debt that has a higher interest rate.
Although this may be true, what many people need to think about is the individual situation the person is in. I will briefly explain below to help you decide which method may be better
WHEN DEBT SNOWBALL METHOD IS A GOOD IDEA
Generally it might be a good idea to consider using the Debt Snow Ball Method for paying off your credit card debt if you have multiple credit card debt that is fairly low on some cards. You can then pay off the card, and be done with it! The benefits to this are largely psychological. Instead of facing 5 credit card statements each month, you face two.
The amount of money you lose due to interest is negligible in comparison to the psychological benefit you have of paying off the debt.
WHEN HIGH INTEREST METHOD IS A GOOD IDEA
You are best to use the High Interest Method when paying off debt if you have multiple card debt that is fairly large sum. In this case, you would be best off making payments on the highest interest rate debt. Or this method might be the best for you if you simply want to pay the least amount of interest as possible.
Hope this information was informative, I recently had to choose myself in paying off my own debt. I ended up actually using the debt Snow Ball Method simply because it was easier for me to pay off one card then move on to the next. Also the amount of interest extra I had to pay was probably less than a dollar or so?
Cheers!
SOURCES:
https://www.cnbc.com/2017/02/17/credit-card-users-rack-up-over-1-trillion-in-debt.html ( 1 Trillion Debt USA Credit Card)