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HomeBlog Debt ReliefWhat Is The Debt Avalanche Method
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What Is The Debt Avalanche Method

August 11, 2013 by National Debt Relief

debt signThere are different ways to pay off your credit card debt. Most of the time, the main concern is the high interest that these cards usually add to your balance. The higher the interest is on your debt, the longer it will take for you to get out of your debt situation and the more money you will waste in the long run. The interest amount benefits no one but the creditors. Instead of making them rich, you may want to deal with that so you do not waste any more money.

You have a lot of options when it comes to debt relief and debt avalanche is one of them. If you have the income to support your payments and your basic expenses at the same time, this can be something that you may be able to use. It all revolves around restructuring your payment plan by ranking your debts according to priority.

There are two ways that this can be done: debt snowball and debt avalanche. In a previous article, we discussed how debt snowball method prioritizes the debts with the lowest balance. On the other hand, debt avalanche puts the debt with the highest interest rate first on the list.

Benefits of paying off the high interest debt first

So what exactly is the benefit of paying off the high interest debt first?

One the most prominent reason is you are actually reducing your overall debt payments by removing the high interest debt first. Of course, you can always try to negotiate your credit card interest first. But if that does not work, you need to focus on eliminating the high interest debt before you take care of the rest.

Most cards will keep on adding the interest amount to your balance as long as you are carrying it over to the next month. The interest amount that is added to your debt will be based on your interest rate and the balance from your previous billing. Unless you pay down your debt, you will be wasting money by paying high interest too.

When you concentrate on your the debts with the biggest interest rate, that means you will put in the most money into this account. That will help lower your balance faster and in effect the interest amount that you will end up sending to your creditors – which is another benefit to the avalanche method. Most of the time, debt avalanche allows you to get rid of your credit obligations more quickly.

How to pay your debts using the avalanche method

Usually, people who use the debt avalanche method does not have the luxury of a debt expert so you may want to pay attention to the step by step process that will be discussed in this part of the article. You may want to use a debt avalanche calculator for this or you can do the math on your own.

Step 1: List your debts according to priority.

Start by listing all your debt obligations. Ideally, you want to put everything here but you also have to consider the credit accounts that charge prepayment penalties. Try to call the creditors and ask them to waive these charges or you can just put them at the bottom of your list. The important task that you have here is to place the debt with the highest interest on top. This will be your priority debt. Place the next highest on the second spot and continue until you have ranked your debts accordingly. While important details like the account info, current balance, minimum payments, interest rate and the due date. Total the minimum payments and that should indicate the minimum debt payment fund that you need to raise.

Step 2: Determine your debt payment fund.

Creating a budget will help you determine how much money you can allot for your debt payments. Identify your income and the basic expenses that you have. Make sure that you have a positive amount when you deduct the expense from your income. Also, it has to be more than the total minimum payments of your combined debts. If not, you need to either cut back on your spending or you can earn more money. The debt avalanche method requires that you debt payments should be higher than your monthly minimum.

Step 3: Distribute the debt payment fund in your debt list.

When you have both your debt payment fund and debt list, you want to distribute your funds based on the minimum payments on your list. After putting the minimum amount, any extra money that you have will be added to what you allocated to the first debt on your list. You will continue to follow this list until you have completely paid off your priority debt.

Step 4: Add the freed funds the next debt on the list.

Once the first debt is paid, you will get the whole amount that is now available and you will add it to the next debt on the list. You will continue to follow this until the second debt is paid off. After which you need to repeat this step until you have gone through all your debts.

This option takes some patience because the early success is not guaranteed here. You are lucky if the debt with the highest interest has a low balance. That means you will experience immediate success that will motivate you to move on to the next payment. It helps to set up milestones so you are not discouraged by the seemingly long time that it takes to completely pay off a debt. Budget for small rewards once you reach these milestones so you are encouraged to push through despite the somewhat long payment period before you.

If you want to know more about how you can get out of debt, view this video for more information.

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[email address is thomassabrina21@yahoo.com] Easy National Debt Relief Caller: Nocona Transcribed WE 2/28/2021 Nocona: The call is recorded. Tell me a little bit about how you found National Debt Relief, and why you chose their program over some of the others that are available. SABRINA: Okay. Well, they were the second program I looked into. How did I see them? I think, a random email or something like that. I found them myself on accident. But they’re the second one. ‘Cause the first one said they couldn’t work with people in Washington State. I have no idea why. And then, they said the state couldn’t do that. And then, I found National Debt Relief, and they were like, “I don't know what they're talking about. We can and we will.” And they did, and they're doing an awesome job. Nocona: Can you tell me a little bit about what communication is like, how you feel about customer service, and what they were like to go through this process with? SABRINA: The initial process was easy. And the person was very competent and reassuring, too, because I needed to be reassured. And then, all the customer service since then, if I need to get ahold of them, I give them a call, and they answer. And it's stellar performance on their staff. And when they see a problem, anything, they give me a call too. Nocona: So they’re pretty proactive when things come up? SABRINA: Yes. Nocona: Is there anything at all that you think they could be doing to make the customer experience easier or better, anywhere you'd like to see them make changes? SABRINA: No. I don't see how they could improve. They're great. They've taken so much weight off my shoulders, you don't even know. Nocona: I think I know, probably, how you’ll answer, but I have to ask. If you could rate the program that you've gone through, between one and five, five meaning you'd recommend National Debt Relief to other people, one meaning you're very dissatisfied, how would you rate them? SABRINA: A 5. And you are correct, you did know. [Laughs] Nocona: Do you have any advice for people that have to go through this kind of experience, anything that you think is helpful to be aware of upfront? SABRINA: Just to make sure you have all your bills, that you know what you want, even though you can add later. So it's really not that big of an issue, because you can call them back. But the original adjustment of how much money is going to be taken out and stuff, it’s best if you just have it all together in the first place. Nocona: So, be prepared when you’re going into it. SABRINA: Yeah. In fact, when I first started doing it, I was having them take it out twice a month or something. I forgot. Anyway, I changed it to where they only take it out in the beginning of the month, all of it. And that happened immediately with zero issues. So like I said, they work really well with you, and they listen to you, and they get things done. Nocona: Is it okay if we share your comments as a review for National Debt Relief to help people that are thinking about going through a program like that? SABRINA: Yeah, feel free to. Because if they’re having issues I would recommend this business up and down the block. Nocona: When we publish a review, we just use your first name. We don't publish last names or any contact information. And I'll send you a one time link to the review. That way, if there's something you need to add, or if you want to make an update or change as your experience evolves, you're welcome to do that. I have thomassabrina21@yahoo.com. Is that the right address for you? SABRINA: That is correct. Nocona: The call was recorded.

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