HOW TO PAY OFF DEBT FAST UK: Debt Snowball vs Debt Avalanche

[@TheHumblePenny]

Which of the 2 methods is your favourite? Debt Snowball vs Avalanche? and why?

[@SelfInvested]

I used to think avalanche all the way because it's more efficient. But from what I've seen, the snowball method has been shown to be more effective because people are more likely to stick to it. I guess, as you say, it depends on who you are, I know I'd stick to the avalanche method so would be my personal preference, but if you've been having a hard time with debt and need a quick win, the snowball method might be the more sensible option...

[@TheHumblePenny]

I totally see the appeal of the snowball for sure :)

[@keni919]

Thank you for the video Ken, very insightful. My favorite method is the Debt Avalanche; because I'm of the view that the less interest I pay, the better. Do you have a guide as to how someone could replicate the spreadsheet that you used in the video - in terms of the excel formulas that were used to calculate the results? Kind regards

[@financereboot9215]

I'm currently using the snowball effect, the quick wins really keep me motivated and I hope I can get a 0% balance transfer deal for the largest high interest debt and save in that way 😅

[@SashaYanshin]

A minor point, but most of those calculators including the one in your video do not calculate interest correctly because they use US-style simple interest instead of compound numbers used in the UK. In your example - the overdraft interest per month is stated as £117.38 but it would actually be £103.29. Important to not just use any random tool found online because although they are similar, US and UK credit systems do have some big differences. 👍

[@TheHumblePenny]

Valid minor point, Sasha! :) Hence why I'm not sharing this specific spreadsheet. It's purely illustration purposes. The points made in the video still remain 100% valid. This is what we want people to focus on. Thanks for sharing 👍🏼

[@SashaYanshin]

Absolutely agree - it actually means that both methods will cost less and both take less time to complete as well 😀

[@mwakananyangwe7943]

I got a car last year which I am supposed to pay off in 2024. I made a big payment 3 months ago and I couldn't believe how much I saved on interest. I was told that I will finish the loan in 2022. I cant wait to pay another one so that its off my hands next year. Thanks for video Ken.

[@TheHumblePenny]

You're winning, Mwaka! 😊

[@ninatladi4132]

I used a modified debt payoff, my credit card interest was extremely high and thereafter used the snowball. I cried the day I got the settlement letter from the bank, I paid off my largest debt, a personal loan 4 years early (6 year term).

[@TheHumblePenny]

Oh WOW! I know how good that feels 😊. Huge welldone!!

[@si86cossie]

Do you have a link to the spreadsheet please?

[@mikec9793]

Hi Ken, Portuguese living in the UK fan here. I was wondering if you could do a video or share your opinion on making videos on Facebook vs KZbin from a financial point of view. Which one is better? Thank you.

[@TheHumblePenny]

Great question. Added to the list 😀

[@HolisticMoney]

Both avalanche and snowball have such great points to them. It really is a matter of person preference though. What works for one person may not work for someone else. I think you did a great job breaking them both down though!

[@TheHumblePenny]

Yes, you're spot on! Thank you :)

[@karenhowlett6511]

I am debt snowball. I like the small wins. I have cleared two small balance that have been hanging around in three months. It has really lifts my spirts and motivated me to pay the big horrid credit cards. I will never take on debt again. It causes a lot of pressure and anxiety.

[@chrisbaker91]

Think with how UK student loans are structured often they could be ignored or deprioritised e.g Plan 1 will always be inflation max so in "real terms" is zero cost. Plan 2 unless you are a high earner it will get written off before you pay anywhere near your capital back, the exception being those high earners then can treat it just as another loan to minimise interest. Obviously just examples of types of debt to show the point rather than any specific plan as it might come down to some form of hybrid with many people such as paying off a certain loan to free up utilisation to maybe get a 0% balance transfer to shift a cc debt from a high interest to low interest.

[@angelwings1]

The debt avalanche makes so much more sense!

[@JordanWilliamsN]

Great video, I too am on the road to debt freedom!

[@xieyeet2049]

as am I!

[@devb2947]

debt freedom is a mindset!

[@JordanWilliamsN]

@@xieyeet2049 great! keep it up

[@TheHumblePenny]

Keep going, Jordan! :)

[@stephen6262]

Ken great video love your debt videos and paying off mortgage videos .I do the avalanche .Still got 108000 left but when I started was 261000 getting there .I wont ever forget that you said get it down below 99000

[@TheHumblePenny]

Awesome!! :). You've made AMAZING progress there :)

[@funmianjorin8089]

Thank you very much. A clear illustration about paying off debts. At the moment l am using the avanlache

[@TheHumblePenny]

Nice!

[@chrishedley7399]

I never include student finance loans when thinking about debt (Usually because its kind of a background thing you never really have to deal with if youd rather not). It's something I'd probably look at as other debts (Like mortagage) disappear and I have developed investments to a good strong level.

[@TheHumblePenny]

How much do you owe in student loans, Chris?

[@chrishedley7399]

@@TheHumblePenny £28k at 1.1% interest.

[@jamespearson5750]

Great video. @thehumblepenny, is there a scenario where a hybrid model would be used? The quick wins looks like it would be a great incentive for most people but in your scenario is at a cost of £6k. Is there a method that could contribute towards the quick win strategy (snow ball) but also incure less additional interest? Just food for thought. Thanks.

[@nicholasberg8188]

Hi Ken, great video very helpful and practical. I was wondering if you would ever do a live session that everyone could tune into. It would be very interesting to get a feel for how your online classes go at the FJA - Thanks

[@TheHumblePenny]

This is a great suggestion! 😀. What could we talk about on the Live? Please suggest.

[@nicholasberg8188]

Thanks - I personally think that your videos on mortgage overpayments and how to become debt free are really helpful.. it’s helped me massively and changed my mindset completely.. the issues that I am struggling with is what is the best small regular investment that could be made to make your money work for you.. I am working on putting money onto a cash isa so it’s builds up and then when my mortgage term ends making a lump sum payment to clear it quicker combined with overpaying each month - hopefully the live session participants will ask lots questions (I know I will be) so I doubt there will be any dead air

[@TheHumblePenny]

Great! We'll do one on Tuesday. Look out for the scheduled LIVE 😀

[@nicholasberg8188]

Just wondering what time on Tuesday the live might be, just so I can get tuned in to watch it all - looking forward to it

[@hopeware3511]

We have been debt free for many years , but I generally recommend the debt snowball to others. We have always been low income and know first hand now important those quick wins are to staying motivated. However, I readily acknowledge that paying off debt is the main objective - no matter how you get it done.

[@TheHumblePenny]

100% agree that those motivations are absolutely needed 😀

[@yarrumblob]

I'm currently using the avalanche method. Firstly though, I managed to shift my car loan of 7.7% onto a credit card at 3.9%. Then I took out another credit card on a 0% balance transfer and managed to transfer half of the balance from my existing credit card of 3.9% effectively cutting the interest rate from 7.7% down to 1.95%. These are my only debts aside from my mortgage. I'm concentrating on paying off the 3.9% card and then the 0% credit card before the 0% deal ends in 18 months. Then the next step of my plan is to make mortgage overpayments. The best way to feel like you are winning with the avalanche method is to see the amount of interest you are paying decrease each month as well as the balance of the overall debt. With the avalanche method you have to be disciplined and committed.

[@dipti1661]

Great Video - could you guide on junior investments please.

[@lisabygrave6607]

Truthfully I didn't even look at the interest rates when I started paying my debts, but when I did pay a one-off at a time I was so excited. I think I started with the smallest amount that was owed first. Thanks for the definitions though, so helpful for my clients

[@neilog747]

Great video! Emotions are dangerous here, because the debt avalanche method is definitely better. TIP: I'm using the debt avalanche method but will contact my credit card company to put a hold on the account so I cannot spend from it. It removes the unholy spectre of temptation, which for me can undermine my own plans.

[@eulynwebb3690]

Debt Avalanche for me....clear the debt with the highest interest rate 1st