Debt Reduction – The Hybrid Method

By Roger G. Best

We’ve already talked about the Snowball Method and the Avalanche Method of Debt Reduction.  They both have their advantages and disadvantages.  The Snowball Method works toward paying off debt and does so by playing into basic human emotion.  It pays off the smallest debt first, then moving on to the next smallest and so on, until all your debt has been retired.  This method tends to be very emotionally satisfying because you will be able to completely pay off the smaller debt very quickly, leaving you with a sense of satisfaction.  The disadvantage is that the Snowball Method doesn’t take into account the actual cost of the debt.  If those smaller debts that you have are also the lowest interest rate, you’ll end up paying a lot more in interest, making this method the more costly of the two approaches.

The Avalanche Method of debt reduction takes an inverse approach to debt reduction.  It looks at your most costly debt and works to retire that debt first.  The disadvantage is that the debt with the highest interest rate is often the ones with the highest balances.  This means that you may not be able to completely remove one of you debtors from the list for a longer time period than you will using the Snowball Method.  The Avalanche Method does save you money in that it works to pay off the most expensive debt first, saving you more money (typically, a LOT more money) than other methods.

So, what other methods are available.  A third option is known as the Hybrid Method.  Basically, this is the blending of the Snowball Method and the Avalanche Method to take the best of both and reduce the effects of the negatives.  Although this approach can be somewhat complicated to figure on your own, it still sounds fairly simple when described.  You order the credit cards (and other debt) from highest interest rate to lowest, like the Debt Avalanche Method, but move the debt with the lowest balance to the top.  This option gives you a “quick win”, for the emotional satisfaction, yet can still save you a significant amount of money and time when compared to the Debt Snowball Method.

There are other options that I’ll approach in my next blog entries, but I’m REALLY working on making these things shorter, so we’ll stop here for today.  Take a look at the option offered by (yep, you there right now).  It uses the Hybrid Method to get you out of debt quickly, while saving you the most money and time toward your goal of being out of debt.  It uses over 2300 different calculations to create the best path to a debt free life.

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