By: Submit Nifty February 19, 2025

What is the Best Debt Repayment Method?

Debt Snowball

The snowball method involves looking at all your debts. Write down the balances, along with the minimum payment. With the snowball method, you pay the minimum on all debts except for the one with the smallest balance. Put all extra income to this small debt. Once you pay it off, you move on to the remaining debt with the smallest balance and dedicate all money to that debt until it is paid off.

The benefit of the snowball method is that it gives debtors momentum. You can see at least one small debt get wiped out, which should build confidence for continuing to tackle the remaining debts.

People run into certain problems with the snowball method, however. For example, they might forget to make minimum payments on all other debts, in which case they will default. Also, you end up paying more over the entire life of the loan because you are not paying down the most expensive debt first.

Debt Avalanche

This is another popular method. Again, write down all your debts, along with their interest rate. You then pay the monthly minimum on all debts. You will then dedicate all extra money to the debt with the highest interest rate. Once you pay this expensive debt off, you then move to the remaining debt with the highest interest rate.

This method eliminates the most expensive debts first, which ultimately should save you money. However, some debtors run into problems. For example, they might never get sufficient momentum to stick with debt repayment.

The debt with the highest interest rate could be the largest, which means it could take years to pay it off. You could end up losing focus and end up deeper in debt. Some people report feeling like they are treading in water with the debt avalanche method.

Debt Snowflake

Some people swear by the debt snowflake method. This method involves getting small savings (“wins”) each day, and then funneling these wins into your debt payment:

Using coupons to save a few dollars on groceries.
Doing a small job for a neighbor and earning $25.
Selling something online or at a yard sale.
Saving money on gas or other purchases by using an app.
Getting $20 in a birthday card from your grandmother.
Finding a $5 bill on the street.

You take any small wins each day and then funnel them toward your debt. Each win is like a tiny snowflake. On its own, it might not be impressive. But when combined with other snowflakes, you are quickly reducing your debt levels.

If you want to use this method, then you still must pay the monthly minimum on your debts. Your creditor won’t cut you slack for missing the monthly minimum because you didn’t have enough “wins” to go around.

You also need to decide which debt to prioritize to pay off faster. Many debtors combine the snowflake with either the snowball or avalanche method.

Debt Consolidation

This is another technique for paying off debt. Essentially, you consolidate multiple debts, often by rolling them into a new debt which hopefully has a lower interest rate. Using a balance transfer on a new credit card is a method of debt consolidation.

The advantage is that you are spending less on interest each month, which means you can pay down the principal faster. Ultimately, you should get out of debt quicker.

A negative is that not everyone is eligible for a debt consolidation loan. Further, you might not ever gain the satisfaction of paying off at least one debt since they are all consolidated into a jumbo debt. Some debtors can lose focus or momentum and never pay everything off.

What About Bankruptcy?

Bankruptcy is another way of getting rid of some of the most common debts. We must say upfront, that bankruptcy is not ideal for all debtors. But we are surprised at how many people automatically eliminate it as an option. They think it’s too complicated or that their debts don’t qualify. Others are afraid of what will happen to their credit if they end up filing.

With a Chapter 7 bankruptcy, you can eliminate some of the most burdensome debts:

Medical debt
Credit cards
Personal loans
Some taxes

You can’t eliminate family law obligations (like child support or alimony), and you will have to turn over your car or home if you hope to eliminate those loans. Nonetheless, you can usually free up considerable amounts of money by getting rid of credit cards. You can use this freed up cash to pay down other debts.

A Chapter 7 bankruptcy typically takes less than 6 months, from start to finish. That means you can quickly start enjoying peace of mind by eliminating some of the peskiest debts that have kept you awake at night.

Call Us Today

Resolve Law Firm provides fact-based financial solutions to clients in California. We do more than legal work. We believe in empowering our clients to make the best choices for themselves and their families. To find out more about how to finally tackle your debt, please call our office to schedule a private consultation with our San Francisco bankruptcy attorney.