2 Proven Alternatives to the Debt Snowball Method

Are you ready to pay off your debt but are unsure about where to begin? The snowball method of debt payment may be common but like most things, it has its shortcomings.

What is the debt snowball method?

This form of payment was popularised by finance guru Dave Ramsey. It tackles debt payment by arranging them in order of smallest to biggest balances owed, so you can pay in that order.

This results in getting rid of smaller debts quickly, giving you the motivation to proceed along the debt payment journey. The simplicity of the debt snowball makes it a popular method, but there are others just as effective.

  1. The Debt Avalanche Method

This is a mathematical approach to tackling debts by targeting those with the highest interest rates first because they cost the most. For example, using a personal loan calculator, if your list of debts show:

  • First credit card- £4,000 balance at 20% interest rate
  • Second credit card- £8,000 balance at 15% interest rate
  • Student loan- £3,500 at 2% interest rate
  • Car loan- £5,000 at 4% interest

Going with the debt avalanche method, you would start by paying off the first credit card because it has the highest interest rate on the list.

This means you should make out any extra payments to the first credit card, and pay the minimum on the remainder of your debts. With the debt avalanche method, you don’t take into consideration your balances.

  1. The Debt Snowflake Method

This is a spin-off of the snowball method. While the debt snowflake also targets paying off the smaller balances first, the difference is it does so at a greater frequency.

For example, let’s say you can afford to pay £300 extra towards your debt but can’t make the payment in one go. You could decide to spread it across the month- paying £75 each week. This is the same thing, and is less of a burden on your cash flow.

In addition to this, any additional money you make should quickly be put into your debt. If you saved £10 from a discounted purchase at the store, put it into your debt. Found an extra £5 in your old shorts? Got a £50 commission from a successful sale? Put it all into the debt you are paying.

Which is best method?

Not many people like to hear this, but there are no right or wrong methods. As long as they work towards reducing your debts, it is fine!

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