Debt is something that affects the vast majority of Americans today. In fact, Comet reports that 80.9% of Baby Boomers, 79.9% of Generation X, and 81.5% of Millennials are currently in debt. That’s a lot of people! The adverse effects of debt can be detrimental – it can greatly harm your physical, mental, spiritual, relational, and, of course, financial health. But trying to get out of debt seems insurmountable to most. So, what is the best way to pay it off, and how do you get started? 

There are two main approaches to paying off debt – the debt snowball and debt avalanche methods. These methods are similar and reliable to help you get out of debt faster and with less interest. But is one better than the other? We will look at the pros and cons of each.

Debt Snowball

The debt snowball method works by first organizing your debts from smallest to largest amount. This includes your student debt, car loan, any credit card or medical debt, and mortgage. Continue paying the minimum payment for all your debts and then put any and all extra cash towards paying off the smallest debt. (In order to do this successfully, you’ll need a budget to stick to!) 

You continue to make minimum payments on all your debts, but you put any and all extra money towards your smallest payment. Once it’s paid off, you “roll over” what you were paying on that first debt, apply it towards your second debt until it is paid off, and so on, until you are debt-free! It tackles your debt one step at a time. The method is simple and easy to use. Sure, it will require discipline and commitment, but it is definitely worth the effort!

PROS:

The biggest benefit of this method is that you stay motivated and wipe out debts quickly. By starting with the smallest debt, the hope is that you’ll be able to pay it off quickly and find encouragement and motivation. It also encourages you to stay organized, stick to a budget, and save time and money. 

CONS:

Since you’re paying off your debts from the smallest amount to the largest amount, you’re likely still paying big interest rates on some of those other debts. For example, if you start by paying off a $400 medical bill but have $2,300 in credit card debt, you’ll continue paying higher interest fees on the credit card as you pay off the medical bill. 

Debt Avalanche

The debt avalanche method addresses the biggest “con” to the debt snowball method. Instead of working from the smallest amount to the largest, the debt avalanche method tells you to organize your debts by interest rate. 

You organize them from highest interest rate to lowest and attack the highest rate debt first. Just like with the debt snowball method, you continue making minimum payments on all your other debts and roll over what you were putting towards the first debt towards the next until they’re all paid off. 

This method is strategic and will save you time and money! 

PROS: 

You save the most money with the debt avalanche method. By knocking out the debts with the highest interest rates first, you’ll save yourself months of steep charges and have more cash to put towards the following debts. 

CONS:

This method can take more discipline and commitment since you likely won’t see entire debts eliminated as quickly. You’ll have to keep yourself motivated throughout the process! Remember that if you include your mortgage in your list of debts, you may need to skip it with the debt avalanche method and only continue making the minimum payments. 

Which Method is Better?

Both methods are useful and will help you pay off your debt. One is not inherently better than the other, so choosing one for yourself depends on your unique circumstances. 

If you know you’ll need the motivation to cross entire debts off your list, use the debt snowball method. Furthermore, if you have many or many different kinds of debts, the debt snowball method will probably be the most helpful for you. For example, if you are carrying balances on 5+ credit cards, have a car loan, and have student debt, we’d recommend using the debt snowball method. 

However, if you want to apply a little more strategy and can stay motivated on your own, utilize the debt avalanche method. This is especially helpful if you have a few high-interest-rate debts, like store credit cards or a cash advance loan.

Choosing to use the debt avalanche method can help you to pay off your accounts with higher interest rates and assist with quickly paying down your debt, which can, in turn, prevent you from accumulating more debt in larger amounts. However, not seeing results as fast as with the debt snowball method can be discouraging at times, and not sticking to your plan could have a negative impact on your finances.

How To Decide Which Method Works Best For You

Both the debt snowball and debt avalanche methods will help you achieve the same goal of paying off your debt if done consistently. Figuring out which one works best for you and your financial situation by maintaining a budget, staying organized, and keeping on track can help you pay off your debt efficiently. 

If you are married, sit down with your spouse and discuss your financial situation and where you want to be in terms of your short and long-term goals when it comes to debt. Getting on the same page is important, and it can be a crucial factor in making effective decisions regarding your finances.

Pray for direct guidance from God, and ask Him how you should manage your finances. Overcoming debt can be stressful, but the Bible tells us in Philippians 4:6, Do not be anxious about anything, but in every situation, by prayer and petition, with thanksgiving, present your requests to God. By trusting God in everything that we do, we are able to understand that we are not owners of our finances but managers of what God has entrusted to us. Actively making smarter decisions can make us better stewards of our finances, and this can, in turn, assist us when making decisions on how to pay off debt or anything else that comes our way.

A final method of paying down debt is to consolidate your high-interest loans under a single, lower-interest loan that’s more manageable, for instance, a personal loan or home equity loan. AdelFi’s Loan Consolidation Calculator is a great way to add up your debt and determine the monthly costs if you consolidate under a new loan. As a financial institution focused on giving your money a higher purpose, AdelFi offers this and other easy-to-use financial tools to help you be a better steward of God’s resources.

This article has been adapted for use by AdelFi for the benefit of its audience and in exclusive partnership with Crown Financial Ministries. This article was originally written by Chuck Bentley, CEO of Crown Financial Ministries and was posted to Crown.org. To learn more about Crown’s mission go to crown.org.