Do you want to pay your debts all by yourself but wondering how to prioritize and pay back your credit cards? If yes, then you can follow two popular DIY credit card debt repayment strategies – debt snowball and debt avalanche methods. Go through this article to know how you can repay credit card debt by prioritizing your credit cards as per these two strategies.
Debt snowball strategy – The steps
List your credit card debts from the lowest balance to the highest one. Make minimum monthly payments on all of them except on the smallest one. Pay as much as you can on the smallest debt. This goes without saying that the payment will be more than the required minimum payment on the debt. Continue doing so every month till you pay the last cent on the card with the smallest debt. Repeat the process with the second smallest debt in your list.
Debt avalanche strategy – The steps
List your debts from the highest interest rate to the lowest one. Pay the required minimum amount on all the cards except the one with the highest interest rate. Make at least a little more than the minimum payment on the card with the highest rate of interest. Follow this strategy till you pay off the highest interest rate credit card. Repeat this strategy until you’ve paid all your unsecured debts.
Irrespective of whether you follow debt snowball or debt avalanche, you should try to save as much as you can and stop using your credit cards for the time being. Otherwise, you will not be able to repay debts fast. Instead of following any one strategy, you can mix these two strategies as well. How can you do so? It’s quite simple. You can repay two debts on your list by following the debt snowball and then make a fresh list and target the highest interest rate debt. In this way, you can also stay motivated to pay off the entire unpaid balance. It is up to you how you want to prioritize and repay your unsecured debts.
While comparing between debt snowball and debt avalanche, you should know that debt avalanche can benefit you more financially, since you’re targeting the highest interest rate debt first. The more time you take to pay off your high interest debts, the more money you’ll lose as you need to continue making the minimum monthly payments on the debts till you repay them completely. So, more interest rate usually means more money, especially if you have high unpaid balance on it. On the other hand, debt snowball will help you stay motivated since you can repay your debts comparatively faster.
To conclude, you can mix these two strategies as per your suitability. Just remember to pay off your debts completely before you start using your credit cards again or take out a new loan. If you follow this, you’ll soon be able to become debt free and regain control over your financial again.