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Debt Avalanche Vs. Debt Snowball Techniques Of Debt Repayment

Here are the differences between Debt Avalanche Vs. Debt Snowball. Visit https://www.investmentz.com to know more!<br>

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Debt Avalanche Vs. Debt Snowball Techniques Of Debt Repayment

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  1. Debt avalanche vs. debt snowball techniques of debt repayment

  2. The Debt Avalanche Strategy • The avalanche technique of debt repayment advocates paying off debts with the highest interest rates first and then moving to the ones with lower interest rates. • Unlike the snowball technique, this strategy does not take the principal amount into consideration. • Often, the high interest rates cause loan amounts to skyrocket as opposed to the base or principal amount borrowed from the lender. • As a result, paying off high interest debts first relieves an investor of financial crunch caused due to high interest amounts. • It also helps one to save up for other financial goals such as preparing investment plans and spending on current financial requirements.

  3. The Debt Snowball Technique • The debt snowball technique deals with paying off the debts with the smallest principal amounts first and then proceeding to those with higher ones. • Unlike the debt avalanche strategy, this technique does not take interest rates into consideration. • Devised by finance expert Dave Ramsay, this technique is particularly suggested by finance professionals and registered investment advisors when a borrower’s principal loan amounts are considerably high but the interest rates are comparatively low. • Just like the SIP investment plan is a systematic means of investing in securities, debt snowball & avalanche are useful strategies one can avail while repaying debts.

  4. Debt Avalanche Vs. Debt Snowball Debt Avalanche Debt Snowball • It considers the interest rates of debts. • It advocates starting by repaying debts with highest interest rates first. • It may be leveraged when the interest rates of debts are higher in comparison with the base debt amounts. • It considers the principal amounts of debts. • It advocates starting by repaying debts with the lowest principal amounts first. • It may be leveraged when the principal amounts are higher in comparison to the interest rates.

  5. Visit www.investmentz.com to know more!

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