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Snowball: Low Balance |
Avalanche: High Interest |
| 0 |
Boost 5 |
10 |
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Low $0 |
Target $0 |
High $0 |
If you have credit cards and other types of loans and are looking for the best way to prioritize your debts, you should read this.
The Debt Snowball is a debt reduction strategy in which debts with the lowest balance are repaid first.
The Debt Avalanche is a debt reduction strategy in which debts with the highest interest rate are repaid first.
Most people would probably recommend paying the highest interest rate first, and usually I would agree. But what if one of your debts is only $1.00?
Obviously, you would pay off the $1.00 debt first. But why? Because it is so small.
The real question is: How do you decide when a debt is small enough to deserve special treatment?
WhiteOut Debt does that for you.
The Snowball/Avalanche slider defaults to Avalanche, giving priority to debts with higher interest rates.
The Target slider defaults to the natural break point between your smaller debts and your larger debts.
The Boost slider defaults to 5 and determines how much preference is given to debts below that Target. The greater the gap between the smaller and larger debts, the more preference is given to the smaller debts.
Although the overall order of your debts will usually make sense, it isn't that important. Your attention should be focused on paying the debt listed first.
Once that debt is paid, toggle it PAID and WhiteOut Debt will automatically recalculate and show the next recommended debt to focus on.
| Account Name | Balance | Interest Rate | Monthly Interest |
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What if the monthly interest is more than you were expecting? One of the most effective ways to reduce the cost of your debt is to lower the interest rate. That may be easier said than done, but it is worth exploring your options. You might consider refinancing, a home equity loan or HELOC, or transferring higher-interest credit card debt to a card with a lower rate. Be sure to look beyond introductory offers and consider the interest rate, fees, and terms over the life of the debt. Use the calculator below to see how much your monthly interest could change with a lower rate.
Don’t be discouraged if you don’t agree with every result from Whiteout. Everyone’s debt situation is different, and no single strategy can perfectly fit every situation. Instead, consider why Whiteout moves some debts higher and others lower in the list. Your attention should be on the debt listed first, but in the end, choose the debt to pay off first that makes the most sense to you.
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