When Praying "Forgive us our Debts" Doesn't Quite Work

The Snowball Method is a debt repayment strategy that focuses on building momentum and motivation. It involves paying off debts in order of smallest to largest balance while making minimum payments on all other debts. Once the smallest debt is fully paid off, the freed-up money is applied to the next smallest debt, and the process continues. This method provides quick psychological wins, helping individuals stay motivated.

The Avalanche Method is best for individuals who:

• Want to minimize interest costs – By prioritizing high-interest debts, this method reduces the total amount paid over time.
• Are disciplined and patient – Since it may take longer to pay off the first debt compared to the Snowball Method, it's ideal for those who stay motivated by long-term financial savings rather than quick wins.
• Have high-interest debt – This method is particularly effective for those with significant credit card balances or other debts with high APRs.
• Prefer a logical, numbers-based approach – If someone is more driven by financial efficiency than psychological momentum, the Avalanche Method is a great fit.

The Avalanche Method might be hard for individuals who:

• Need quick motivation from seeing small debts disappear may find it harder to stick with.
• Have limited financial discipline and may be tempted to abandon the plan before reaching major progress.

If avoiding interest is the top priority and the person has the patience to follow through, the Avalanche Method is a great strategy for debt repayment!

Alex has the following debts:

• Credit Card A: $5,000 at 22% interest
• Credit Card B: $3,000 at 18% interest
• Personal Loan: $7,000 at 10% interest
• Car Loan: $10,000 at 5% interest

Alex has $1,500 per month available to put toward debt after making minimum payments on all accounts.

• Step 1: Alex makes minimum payments on all debts and puts extra money toward Credit Card A (22% interest).

• Step 2: Once Credit Card A is paid off, Alex moves to Credit Card B (18% interest).

• Step 3: After paying off Credit Card B, Alex focuses on the Personal Loan (10% interest).

• Step 4: Finally, Alex pays off the Car Loan (5% interest).

Outcome: This method minimizes interest paid and allows Alex to pay off debt faster overall.

The Consolidation Method is a debt repayment strategy that involves combining multiple debts into a single loan with a lower interest rate or more manageable payments. This can be done through a personal loan, balance transfer credit card, or debt consolidation program. The goal is to simplify repayment by having just one monthly payment instead of multiple, potentially reducing interest costs and making debt more manageable.

The Consolidation Method is best for individuals who:

• Have multiple high-interest debts – Especially if they’re struggling with high-interest credit cards, consolidation can lower the overall interest rate.
• Want simpler payments – Instead of managing multiple due dates and balances, they’ll have just one monthly payment.
• Have good credit – A strong credit score increases the chances of securing a low-interest consolidation loan or balance transfer credit card.
• Can commit to financial discipline – Consolidation restructures debt but doesn’t erase it. It’s best for those who won’t accumulate new debt while paying off the consolidated loan.

The Consolidation Method might be hard for individuals who: 

• Have poor credit as they may not qualify for a low-interest consolidation loan, making the strategy less beneficial.
•  Lack financial discipline and might be tempted to continue using credit cards after consolidation, leading to even more debt.
• Have little total debt, which would make other strategies like the Avalanche or Snowball Method might be more effective.

If simplifying debt payments and reducing interest costs (while staying disciplined) is the priority, the Consolidation Method can be a great solution! 

Alex has the following debts:

• Credit Card A: $5,000 at 22% interest
• Credit Card B: $3,000 at 18% interest
• Personal Loan: $7,000 at 10% interest
• Car Loan: $10,000 at 5% interest

Alex has $1,500 per month available to put toward debt after making minimum payments on all accounts.

• Alex takes out a debt consolidation loan at 8% interest for $25,000 (the total debt amount).

• This loan pays off all four existing debts, leaving Alex with one monthly payment instead of multiple.

• Since the new loan has a lower interest rate than the credit cards, Alex saves money on interest while making steady, predictable payments.

Outcome: This method simplifies payments and reduces interest on high-rate debts (especially credit cards).