Start Small With The Snowball
The Snowball method focuses on the size of your bills. You pay off your smallest debt first while paying the basic amount on your other loans. This gives you a quick win. Closing a small account early gives you the energy to keep going. Many people find this helps them stay on track.
| Method | The Good | The Bad |
|---|---|---|
| Snowball | You feel successful fast | You pay more interest |
| Avalanche | You save the most money | It takes longer to finish a loan |
Save More Money With The Avalanche
The Avalanche method focuses on interest rates. You pay the debt with the highest interest first. This is the best way to save on total costs because you stop the most expensive debt from growing. It takes more patience, but you pay less money to the bank in the end. For those with high interest costs, reading this article on EPF Account 3 for debt could show you a way to speed up.
How The Two Plans Compare
This table shows how you would rank three common loans. The Credit Counselling and Debt Management Agency says that a clear list helps you stay in control. Use our Budget Calculator to determine your exact monthly surplus before starting.
| Loan | Amount and Rate | Snowball Rank | Avalanche Rank |
|---|---|---|---|
| Credit Card | RM2,500 at 15% | Rank 1 | Rank 2 |
| Personal Loan | RM9,000 at 18% | Rank 3 | Rank 1 |
| Car Loan | RM5,000 at 4% | Rank 2 | Rank 3 |
Choosing The Right Path
Your choice depends on your personality. If you need to see progress to stay happy, the Snowball is for you. If you want to keep as much of your salary as possible, the Avalanche is the winner. Both methods work well if you do not take on new debt while paying off the old ones.
Your 2 Minute Action Plan
- Ask yourself if you want a fast win (Snowball) or big savings (Avalanche).
- List all loans and rank them based on your chosen strategy.
- Set an automated recurring transfer for the minimum payment on all loans.
- Automate an additional payment toward your top ranked loan immediately.