A young couple considers debt management methods based on their financial records.

Making Sense of Debt Management: Snowflake,Snowball, and Avalanche

A young couple reviewing their financial records to aid in their debt management methods.

Debt can be a terrible burden to bear: for older individuals, yes, but also for young men and women looking forward to a bright future, yet plagued by punishing, unrelenting debt-induced stress and anxiety. How widespread is this issue? According to one study, 6 out of 10 Americans (60%) feel that money and debt management are "significant forms of stress" for them.

Use a Debt Consolidation Loan for Easier Management

Multiple payments, variable interest rates, and compounded interest are all stress triggers for millions of individuals, young and old. However, many debtors have discovered a light at the end of the tunnel: a debt consolidation loan. A debt consolidation loan can lighten the load of debt for many borrowers and save quite a bit of money by accomplishing the following objectives:

  • Eliminating higher interest debt
  • Removing the stress of minimum payments
  • Enabling one (and only one) payment each month, at a lower rate
  • Providing a fixed rate, fixed payment loan (i.e., no compounded interest)

If the ease of a debt consolidation loan doesn't appeal to you, then there are other debt management strategies out there. This article will focus on three popular plans: the debt snowflake, snowball, and avalanche methods.

The Snowflake Method

The snowflake method for paying off debt can, as the name implies, be compared to the snowflakes in a blizzard. Individually, the snowflakes don't mean much as they fall from the sky, but when taken in aggregate, they make a significant impact. In the same way, debtors that subscribe to the snowflake strategy put whatever small, micro-savings they obtain on a daily basis towards their repayment plan. Eventually, the theory goes, the accumulation of these small payments will result in total debt relief.

Some pros of this debt management method include:

  • Flexibility. There is no requirement for a structured payment schedule.
  • Mindfulness. You are more likely to think about even small purchases before pulling the trigger.

Some cons are:

  • Limited impact. An extra $100 or so paid towards your debt each month will help, but it won't quickly get rid of a $20,000 student loan.
  • Lack of organization. The lack of an organized payment plan could actually hurt your debt management in the long run.

Many financial experts consider the snowflake method to be an excellent supplement to the snowball or avalanche strategy. However, as a standalone technique, it is generally not considered to be the best way to pay off a student loan or credit card debt.

The Snowball Method

In contrast to the snowflake method, the debt snowball strategy involves a structured plan to get rid of debt. With this method, a debtor prioritizes his debts in order of the amount owed, from least to greatest. Then the debtor focuses on paying off the smallest debt first, while only making minimum payments on all other debts. Once that first debt has been eliminated, then he moves on to the next smallest debt, and so on until he is completely debt-free.

There are several advantages to employing this method, which include:

  • A structured plan. Most people are more likely to follow through on a debt management strategy if they have a specific goal to reach, and a clear idea of how to get there.
  • Practicality. Debtors with limited financial resources may find that the snowball method is more affordable on a month-to-month basis then the avalanche approach.
  • Increased motivation. Seeing one small debt after another disappear can be a wonderful motivation to keep hammering away at your other, larger debts.

There are also a few drawbacks to this method, such as:

  • Increased costs. Since debtors that follow the snowball method only make the minimum monthly payments on their largest debts, in the long run this strategy will cost them more money than the avalanche method.
  • A longer time frame. Leaving the largest debts for last may mean that an individual stays in debt for a longer time compared to the avalanche method.

While the snowball approach has its weaknesses, many people find that the combination of a workable repayment plan with the motivational fuel that comes from periodic small wins makes this strategy an effective way to repay outstanding debts.

A young couple seeks help with debt management, and work with a credit union financial services representative for options.The Avalanche Method

The avalanche method basically takes the opposite approach to debt management from the snowball technique. Instead of prioritizing debt from smallest to the largest amount, people that use this method focus on repaying their debts with the largest interest rates first and then working downwards to smaller ones.

For example, a debtor may have $200 of extra money left over after making the minimum payment for each debt. If he is following the avalanche method, then he'll put that money towards the debt with the highest interest rate, regardless of the total amount owed. 

Some good reasons to use the avalanche method include:

  • Efficiency. The avalanche method is one of the most cost-effective debt management strategies in use, since it can significantly reduce the total amount that you have to pay in interest.
  • Speed. Once your debt with the largest interest rate is paid off, then you'll likely gain momentum in dealing with your other debts. This could ultimately lead to quicker solvency.

There are two potential disadvantages to employing the avalanche method:

  • Discipline. The avalanche method requires a ton of self-control and discipline since one late payment on a high-interest rate debt could undo a lot of the progress made.
  • Motivation. You generally won't see quick results from the avalanche method, which means that you may find it hard to stay motivated.

In short, of the 3 strategies discussed above the avalanche method is the most effective way to pay off student loans, credit card balances, and other outstanding debts. However, it can also be the hardest one to implement.

Summary

Each of the above methods has its own unique advantages and drawbacks. Of course, ultimately it is up to each person to decide the best debt management. Nevertheless, in terms of cost savings, ease of budgeting, and simplification, a debt consolidation loan has few (if any) equals. Many debtors have found that using this strategy enabled them to pay off their debt sooner, and helped them to more quickly regain their peace of mind.

If you are in debt and exploring your options, then reach out to our team of helpful experts at PrimeWay to learn more about our debt consolidation loans. Based out of Houston, Texas, we have helped hundreds of clients consolidate their debt, simplify the payment process, and ultimately become debt-free.

About the Author

Chad Carpenter


chad-carpenter

Look up digital marketing master in the dictionary and you will see Chad’s face. Chad has more than 18 years of digital marketing experience, including several years in the agency world. When he’s not clacking away on his keyboard optimizing PrimeWay’s digital presence, Chad enjoys good food, good friends and good movies (just don’t expected him to watch any in interactive 4D). Chad has two cats, one that loves him and one who is aloof.