So you’ve decided to tackle your debt but you’re not sure where to start? With so much conflicting information out there it can be difficult to get started but when paying down debt there are two popular debt repayment strategies you should consider: the debt snowball and debt avalanche methods.
Both have their unique advantages and can be effective in helping you become debt-free. But which one is right for you? And is it a good idea to refinance private student loans in the process? In this blog, we explain the difference between these methods and how refinancing can play a role in your debt repayment journey.
The debt snowball method focuses on paying off debts from the smallest to the largest balance, regardless of the interest rate. The idea behind this method is that paying off your smaller balances along your debt payoff journey can give you small psychological boosts that keep you on the path toward repayment.
Here’s how it works:
Quick Wins: Paying off smaller debts first can provide a psychological boost and a sense of accomplishment, keeping you motivated.
Simplicity: This method is straightforward and easy to implement, making it ideal for those who prefer a simple approach.
Potentially Higher Interest Costs: Because this method doesn’t prioritize interest rates, you might end up paying more in interest over time compared to the debt avalanche method.
The debt avalanche method targets the highest interest-rate debts first. Given how high some interest rates can be this may save you money in interest over time.
Here’s how it works:
Interest Savings: Focusing on the highest interest rates first, you can minimize the amount of interest over the life of your loans.
Faster Debt Repayment: This method can reduce your overall repayment time, as less money is wasted on interest.
Slower Initial Progress: It may take longer to see progress, which can be discouraging if you’re not seeing quick wins.
While credit card debt, car loans, and other consumer debt can be a big part of your debt repayment journey, student loans also make up a large portion of debt for thousands of people. Refinancing student loans can potentially lower your interest rate, especially if your credit score has improved since you first took out the loan or if you’re struggling to repay and need to make your payments easier to manage. Refinancing allows you to choose new loan terms that better fit your financial situation, whether you want to extend the term for lower monthly payments or shorten it to pay off the loan quicker.
Whether you opt for the debt snowball or debt avalanche method, the most important thing is to stay committed to your plan. Consider your financial situation, your debt, and your personality when choosing a strategy. If seeing quick progress motivates you, the debt snowball might be the way to go. If saving money on interest is your top priority, the debt avalanche could be more effective.
If you’re struggling with high monthly payments or looking for ways to optimize your debt repayment strategy, refinancing might be a good option to add to your overall debt repayment game plan. Contact us today to learn more about how refinancing can help you manage your student loan debt and find relief from high monthly payments. Our team is here to guide you through the process and find the best solution for your financial needs.
Refinancing your private student loans can be a strategic move toward debt payoff. Are you ready to take control of your student loan debt and work towards a brighter financial future? Let us help you choose the path that aligns with your long-term financial goals. Connect with one of our trusted partners at Alt Lending today to get started.