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Use the debt avalanche template to ditch your debt and start saving money.
The debt avalanche method of paying off debt is one of the most popular ways to get out of debt.
Today, you will learn how to use the debt avalanche tracker to start paying off your debt.
But first, let’s talk about the debt avalanche plan.
What is the Avalanche Method of Paying Off Debt
The debt avalanche method is a debt payoff technique where you start targerting the debt with the highest interest rate first.
This pay-off strategy may help you save time and interest over the course of your debt payoff journey.
Debt Avalanche Vs Snowball
Besides debt avalanche, another debt pay-off strategy and more popular one is the debt snowball method. Now, they may seem very similar but they are not.
Unlike debt avalanche, debt snowball prioritizes the smallest debt first. This method is best for those who are in need of motivation as it provides a quick win once the smallest debt is paid off.
You can learn more on how to use the debt snowball to pay off your debt here.
Free Debt Avalanche Template
How Does Debt Avalanche Work
Now that you know what debt avalanche is and how it can help you, let’s dive into how to get started.
1) List down all your debt starting with the creditor, balance, minimum payments, and the corresponding interest rate.
2) Order your debts from the highest to the lowest interest.
3) Add up all the minimum payments.
4) Figure out how much extra you can pay beyond the total of your minimums.
5) You would then make minimum payments on everything except for the debt which has the highest interest rate.
6) Your extra money PLUS the minimum needed to pay the card with the highest interest is what you would pay going forward until it is paid off.
7) Once your number 1 debt is paid off, add its minimum to the extra payment and use it to pay your debt with the second-highest interest rate.
8) Continue rolling over the minimums into the extra debt payment amount until all debts are paid off.
Now, let’s look at this example:
|Creditor||Balance||Interest Rate||Minimum Payment|
|Bank Of America||3,500||19.33%||105|
Let’s say, after looking at your monthly budget, you figured out that you can make $200 extra payment.
The Discover card becomes your top priority, because it carries the highest interest rate. You would then add your $200 to the minimum payment which is $240.
Once the Discover card is paid off, you will add the minimum which is $240 and your extra payment of $200 to the minimum payment of Chase, which is $225. Therefore, your total payment for Chase will be $665 every month until it is paid off.
You will use the same method of minimum payments Bank of America and Citibank.
Which is better debt snowball or debt avalanche?
If you want to get rid of your debt faster, you can do so using the debt avalanche method. However, if you are someone who gets more motivated with small victories, then the debt snowball is better for you.
What is the best debt payoff plan?
The best debt payoff plan can vary from each individual. However, the most popular effective debt payoff strategy is the debt snowball method, where you pay off your smallest debt first. This method gives you motivation by the quick win of paying off smallest debt quicker.
What Happens If You Never Pay Off Debt?
If you never pay off your debt, your account will be sent to a collection agency. The collection agency will contact you and will continues to do so until you settle your account. Additionally, your credit history will be affected.
Final Thoughts On The Debt Avalanche Template
The debt avalanche is an effective way to get rid of your debt. However, it does take patience and commitment to be successful.
The debt avalanche tracker will help you track your progress as you work on paying off each of your debts.
Are you ready to use the debt avalanche tracker? Download your copy now.
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