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What's the Debt Avalanche method?

Saturday, July 2nd

What's the Debt Avalanche Method?

You may have heard the term "Debt Avalanche" when looking at ways to pay off your loans. What is the Debt Avalanche, and how does it work?

Debt Avalanche Explained

When you take a look at your loans, you'll see that they all charge different interest rates. Credit cards, for example, are notorious for charging high interest rates - some even charge 20% or more!

Loans with higher interest rates charge you more for the money that you've borrowed. Wouldn't it be great to pay off those more expensive loans first, and save that money?

That's the idea

That's the idea behind the Debt Avalanche. With this method, you make the minimum payment on all your loans, but put anything extra that you have into the payment on the loan with the highest interest rate.

Once that loan is paid off, congratulations! You're one step closer to being loan-free. Then, take the money that you were paying on that loan, and add it to your monthly payment on the loan with the next highest interest rate.

That's why they call this the "Debt Avalanche". The money that you save by paying off the most expensive loans first, gets added into the payment on your next loan.

You would pay the minimum on the furniture store's card, because they're not charging you any fees for the money you've borrowed. Then, you would put your extra cash into the payment for the other credit card, since they're charging you a lot of money each month.

Once your high interest credit card is paid off, you take the amount you were paying on it, and add it to the minimum payment you've been making on the furniture store's credit card.

Another approach

Undoubtedly, the Debt Avalanche is a smart way to pay off your loans. Many people have used this approach with great success. But sometimes, the amount of loans a person has can be intimidating, and they may lose their motivation if they don't feel that enough progress is being made. Antoher approach that may people choose is debt consolidation.

Put simply, with debt consolidation, a single loan is made to you, which pays off all your other loans. Then, you just make a single payment to that new loan each month.

Why would you get a consolidated loan?

There are several reasons why you may want a consolidated loan.

  • First, you can usually save money over the life of your loan. This is because a consolidated loan's interest rate can be much less that the interest rate charged by the credit card companies you currently pay.
  • Second, you can usually pay off your loans much faster than if you were to continue paying the minimum monthly payments and miscellaneous penalty fees on your current loans. This is because, with a lower interest rate on a consolidated loan, more of your money goes to paying off your loan rather than into the pockets of the lender.
  • Third, you reduce the number of payments you make each month. No more scrambling to make sure every card is paid; instead, you have just one single, simple loan payment to make.

Whether you try to tackle your loans on your own, or use the free advice from a reputable debt consolidation company, the important thing is to start your journey toward a loan-free life. After all, the sooner you start, the sooner you'll arrive.

The Best Debt Consolidation Companies Compare Debt Consolidation Companies Compare Debt Consolidation Company Reviews What are the best Debt Consolidation Companies Best Debt Consolidation Company Reviews

Debt Consolidation Company FAQ

Debt consolidation is a strategy used to help consumers get control over high-interest debt and simplify their monthly payments. Instead of having multiple credit card bills and other accounts to pay, often with extremely high interest rates, debt consolidation reduces those individual debts into a single payment each month.
You may need to have a certain amount of unsecured debt to be accepted into a debt consolidation program (for example, $7,500 or more). If you're struggling to keep up with the minimum payments on your credit cards and loans, you could be a great candidate for debt consolidation.
That depends on the service, but yes: most debt consolidation programs give you a loan to pay off all of your outstanding debts. These loans usually have much lower interest rates and can help you get on top of your financial situation again.
Sure! You could try getting a traditional loan from your bank or credit union, borrow money from friends or family to pay off debts, or work on your side hustle to make extra cash to pay down what you owe. But, chances are good that you've tried that already and still find yourself struggling financially. Debt consolidation could help you handle it once and for all.
It should. One of the biggest black marks on your credit score is having late or missed payments, and consolidating all of your debt into one monthly payment makes it more likely you'll pay on time.
That varies. Some providers don't charge anything for their services, offering counseling and other tools to teach you how to manage your money and pay down your debts. Or, if you're taking out a loan to pay off higher-interest accounts, your fees will include your interest and any other charges associated with your application. Be sure to get your plan in writing before you make a commitment, so that you'll know what to expect.
Most of the time, no. If you take out a debt consolidation loan, it's on you to understand all of the terms and conditions before you sign off. However, there are a few fee-based services that do offer a 100% satisfaction guarantee that allows you to cancel without penalty.
Absolutely. Thousands of people use debt consolidation programs every year to tackle their toughest credit problems. It's a good idea to check out the reputation of any program you're considering: find out what other clients say about their experiences, see if the BBB has rated the company, and determine for yourself if their debt consolidation services are worth your time and (possibly) money.

Compare Debt Consolidation Companies

Select any 2 Debt Consolidation Companies to compare them head to head

best-debt-consolidation-companies
  • National Debt Relief
  • Credit.org
  • Upstart
  • Curadebt
  • Reach Financial
  • LendingTree
  • SoFi
  • SuperMoney
  • LendingClub
  • Payoff
  • American Debt Enders
  • Debt Consolidation Care
National Debt Relief vs Credit.org National Debt Relief vs Upstart National Debt Relief vs Curadebt National Debt Relief vs Reach Financial National Debt Relief vs LendingTree National Debt Relief vs SoFi National Debt Relief vs SuperMoney National Debt Relief vs LendingClub National Debt Relief vs Payoff National Debt Relief vs American Debt Enders National Debt Relief vs Debt Consolidation Care Credit.org vs Upstart Credit.org vs Curadebt Credit.org vs Reach Financial Credit.org vs LendingTree Credit.org vs SoFi Credit.org vs SuperMoney Credit.org vs LendingClub Credit.org vs Payoff Credit.org vs American Debt Enders Credit.org vs Debt Consolidation Care Upstart vs Curadebt Upstart vs Reach Financial Upstart vs LendingTree Upstart vs SoFi Upstart vs SuperMoney Upstart vs LendingClub Upstart vs Payoff Upstart vs American Debt Enders Upstart vs Debt Consolidation Care Curadebt vs Reach Financial Curadebt vs LendingTree Curadebt vs SoFi Curadebt vs SuperMoney Curadebt vs LendingClub Curadebt vs Payoff Curadebt vs American Debt Enders Curadebt vs Debt Consolidation Care Reach Financial vs LendingTree Reach Financial vs SoFi Reach Financial vs SuperMoney Reach Financial vs LendingClub Reach Financial vs Payoff Reach Financial vs American Debt Enders Reach Financial vs Debt Consolidation Care LendingTree vs SoFi LendingTree vs SuperMoney LendingTree vs LendingClub LendingTree vs Payoff LendingTree vs American Debt Enders LendingTree vs Debt Consolidation Care SoFi vs SuperMoney SoFi vs LendingClub SoFi vs Payoff SoFi vs American Debt Enders SoFi vs Debt Consolidation Care SuperMoney vs LendingClub SuperMoney vs Payoff SuperMoney vs American Debt Enders SuperMoney vs Debt Consolidation Care LendingClub vs Payoff LendingClub vs American Debt Enders LendingClub vs Debt Consolidation Care Payoff vs American Debt Enders Payoff vs Debt Consolidation Care American Debt Enders vs Debt Consolidation Care
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