Debt Snowball + Avalanche - How I Paid Off $30k of Student Loans 

Thank you!!! I realized I had always heard about these payment options, but never saw it broken down. I'm glad I was able to convey it helpfully!

Agreed! Debt is super normalized and it takes a lot to change those perceptions. Thanks for subscribing...I just subscribed to your channel as well!

A Penny Plan thank you! New RU-vidrs need to support each other 😀

This is one of the nicest comments I've ever received. Thank you so much...it made my day!!

YAY! I'm so glad it was helpful!!!

Thanks! I'm glad to hear it was helpful. Good luck paying off your credit cards and student loans...you can do it!

You can do it! 👍

Awesome! I'm glad the video was helpful. Either method works, as long as you commit to paying off your debt. You can do it! 😊

Good luck! The extra job / sacrifice is only temporary. Just think of how much more you'll have to put towards your goals once you don't have those monthly debt payments. You've got this!

Thanks for watching! 😊

Yeah. It sounds simple at first, but I realized I never really heard anyone break it down in detail...so that's why I made this video. I hope it's helpful 😊

Go for it. We just finished paying off all our debt (cards, car loan, medical) except the house. Started Dec 2017. Used the debt snowball. It's more behavior then numbers per say. On to the emergency fund now.

Highest interest rate first would be the "debt avalanche" method. Paying off highest interest rate vs. lowest balance (snowball method) is up to you and your personal totals, goals, etc. I would check out undebt.it/ to plug in your numbers and see how fast you can pay things off/how much you can save with the different methods. It's a really cool tool!

I did a video on my exact numbers here: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-tEXakHta7go.html 😊 Quick summary: I lived at home rent-free for the first six months after graduating, which let me put WAY more towards my loans. After I moved out, I dropped to paying ~$1k/month. So the AVERAGE over 17 months was ~$1.7k/month, but the ACTUAL payments were like $3k/month for 5 months, $1k/month for 12 months, and a boost of $3kish from my tax refund. I am thankful for the circumstances that let me pay off things so quickly! And the habits I built then now help me save like crazy. Stay the course on your debt payoff...it's worth it! 🎉

I see - that makes a lot of sense! Thanks for breaking it down for me! :)

Thank you! I am proud and grateful! 🙏

In theory, the debt avalanche would be faster because you pay less interest and therefore less overall 😊

It's my understanding that unsubsidized loans accrue interest from the moment you borrow, while subsidized start accruing after the grace period. If you're out of the grace period and doing the avalanche method, then you would pay whichever has the highest interest rate.

I dont know if it would be worth trying to consolidate them? Like take all the loans 4% and above, and try to get a bank to pay them off, and then you owe the bank all that money at a lower interest rate of 4%.

Thank you! It took me about 17 months. I paid off $15k in the first 5 months, because I lived at home for free. Then I moved out and paid the remaining $15k over the next 12 months 😊

Yes, it is just an example on the methodology - how to decide on an order for loan repayment, how to divide up your snowball/avalanche between the different loans, and the general psychology and goals behind each method 😊 I'm not advocating for any method in particular, just trying to explain some basics for anyone unfamiliar or new to the concepts.

Dale Callahan this is just a demonstration which is very helpful to get a better understanding because lots of people mindframes on this subject is elementary.

It differs between loan servicers. In my case, I had my automatic payments scheduled for the interest rate discount + to ensure I didn't miss a payment. Then I would schedule a later payment manually and select which loan I wanted that payment to go towards. You want to be sure any extra payments are applied specifically to the loan you are attacking with your "snowball". You also want them to apply to the principal, NOT paying ahead for future due dates (this is more common with auto loans, but you just want to double check). Good luck...you've got this!

For sure! Your snowball/avalanche amount would just be smaller (and your timeline longer) since you'd be prioritizing other parts of your budget. The biggest recommendations I'd say would be not to take on any NEW debt + see if there are ways to save on your current expenses (ex: eating out once a week vs. every day, tightening up your grocery budget, etc.). That way you can still make progress, but not sacrifice everything you enjoy...it's about finding balance! I'd check out Shay Budgets - she's really big on that kind of mindset 👍

@@APennyPlan thank you. I find it more difficult to budget due to the fact that I dont have set income or pay schedule.

She isn't taking the interest accumulated into account so she can simplify the math. The debt avalanche method is the mathematically superior choice. You pay less money because the higher interest rate debts spend less time accumulating interest. The debt snowball is the better choice psychologically. You pay off smaller debts faster and it provides a sense of accomplishment that some people need to stay on plan.

Agreed! There is definitely a mathematical advantage to the avalanche in almost all cases.

Yes!! Just starting is already putting you WAY ahead most people. You can do it!!

I used $1000 for this example because it was a nice round number 😊 My actual payments ranged over the months...really high when I lived at home for six months without bills + when I got my tax refund, but a lot lower when I moved out and started budgeting. While it's nice to be done with debt, it's not a race and there's nothing wrong with going at your own pace 🙌 You can do it!

check out dave ramsey he really shows you how to get out of debt, he has a book 'the total money make over' with 7 baby steps on getting out of debt and living financially free

There are free debt calculators online which will give you the breakdowns on how much intrest you will pay and how long it will take using either method. It helped me decide how much my minimum snowball would be and helped my decide what method to use (I choose Snowball to keep me motivated). I will pay off my first credit card at the end of this month and if I be a tight arse, next month I will have a loan paid off. It will take me at least 8 months to have my next credit card paid off 😞 I am hoping I can stay motivated.

Dark Blue Nutrition you use what’s extra from you income after all your bills. Actually it’s very rare that people start off with $1k so that’s not realistic. An extra $100 to start with will work too. It’s not an overnight thing either.. it will take time.

Yep 👍 I paid my loans using the avalanche method in order to avoid as much interest as I could 😊 This video is meant more as an example of the methods...maybe I'll make a more in-depth video on different scenarios!

Interesting! My student loan minimums definitely changed over time, but I had some unsubsidized ones + enrolled in autopay, which reduced my interest rates. Thanks for the insight 👍

My student loan interest was negligible, because the interest rates were so low. If you have high interest rates (like with credit cards or car loans), then the debt avalanche is mathematically superior. The debt snowball is often more emotionally satisfying, because you can potentially knock out smaller debt balances fast.

This is just an example video using my real student loan numbers as the starting point 👍 It took me about 17 months to pay everything off, and I was living at home for the first 5 months which helped A LOT (no rent, utilities, etc.). I did not pay off $10k in 45 days! 😱 I'll do a video soon of my actual numbers, but all I had to pay off was student loans during this time frame. No mortgage (currently saving for a down payment), no car payment (car was a paid-off 2010 truck), no credit cards, etc. It can definitely feel daunting being single...but then you see dual income households struggling, people with six figures struggling, etc. Having more money doesn't help if you just spend it all 😞 But anyways!! Progress is progress, and you putting ANY extra money towards debt is already more than most people do. Best of luck to you! I'm happy to help in any way I can, outside of this basic video which really just shows HOW the snowball/avalanche works, not all the nuances that go into debt payoff 👀 Thanks for watching!

Best of luck saving for that down payment!! I found out late in the closing process (would have had to start all over on closing and possibly lose the house I wanted!) - When you put down 20%, you do Not need an Escrow. So if you are GOOD at budgeting, and get your numbers at closing and feel Confident, you don't have to hassle with Escrow, and can potentially earn Some interest off your money put away all year long until it is time to pay the big bills like insurances and taxes. At least, that is how its done here in Texas. Might be different for you, find a Good realtor and really go over Everything thoroughly you want clarification on as a first time home buyer.

Thank you for the insight! I'm actually in Texas as well!! But I will definitely do some research as it gets closer to that time. I'm nervous just thinking about it LOL so I will be very careful!

Check out Denzel Rodriguez channel education content with Velocity Banking

Yes! Or I will write bigger haha. My setup is very basic right now...but I'll figure it out for next time! :)

It took me an average of 2.5 months to pay off each of my loans using the avalanche method 😊 There are a lot of different factors that go into the timing of the payoff, but the purpose of this video is to show how to organize your loan order and payments for each method. I just used my loan numbers as an example.

These are my real loan amounts, I just rounded payments to make it an easier example. You can see my exact payments here: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-tEXakHta7go.html I technically used the avalanche, but the snowball is very useful as well. I paid these off fast enough that there was barely a difference in savings between the two :)