Skip to content
View all posts
Simplifying Financial Plans and Decreasing Debt Might Be Simpler Than You Think

Simplifying Financial Plans and Decreasing Debt Might Be Simpler Than You Think


Would you like to pay down your debt load? We accumulate debt for many good reasons: student loans, medical bills, mortgages, and other necessities. Our lives are filled with financial challenges, and sometimes our bills get ahead of our incomes. When it comes time to pay down or eliminate that debt, it helps to have a good community partner.

Serving Central New York residents for over 160 years, Pathfinder Bank offers advice, assistance, and tools that help you plan for a robust, responsible financial future. Making decisions about how to approach and pay off your debt can be a great first step. Here are two popular methods to consider, the snowball and the avalanche. 

Make an Impact

In a snowball fight, we roll our snowballs on the ground to gather more snow and then throw that larger snowball at our opponent, making a bigger impact. That’s the idea behind the debt snowball method promoted by Dave Ramsey. The goal is to pay off the smallest debt as quickly as possible by allocating any extra funds to the monthly payment, while continuing to make minimum payments on all of your remaining debt. Once you have paid the smallest debt in full, you dedicate those available funds to the next smallest debt.

By increasing the payment amount on your smallest debt, you can pay it off more quickly. And after you have paid off that smallest debt of yours, it’s easy to increase the amount of payment going to the next largest debt, and so on. In essence, you create a “snowball” of payments as you eliminate each debt, shedding your debts one by one.

How would the snowball method work with the following debts?

  • $10,000 credit card, 20% interest rate, minimum monthly payment $200
  • $7,000 car loan, 4% interest rate, minimum monthly payment $200
  • $15,000 student loan, 3% interest rate, minimum monthly payment $500

You are ready to get rid of your debts and have the ability to pay an extra $50 per month. Pay $250 per month on the car loan and it’s paid off eight months early. Now add that $250 to the credit card payment. Making $450 payments each month gets you to a zero balance in a little over two years. Keeping to the same budget, you can now pay $950 per month on your student loan, making a considerable impact on the length of that loan. With the snowball method, you could be debt-free in less than six years.

Tackle Higher Interest

An avalanche is a large amount of snow that flows down a mountainside at high speeds. When you use the avalanche method of debt elimination, you strategically make greater payment amounts on debts that charge the highest interest rates. Rather than paying more in overall interest charges, since interest is calculated on how much of the loan principal remains over time, this method reduces the lifetime of the loan and the total amount of interest paid by the debtor.

Using the avalanche method of debt reduction, you would pay the extra $50 per month on the credit card bill, while still making minimum payments on your remaining debt, as these funds are borrowed at the highest interest rate. By paying $250 rather than $200 per month, you will save over $5,000 on interest and pay off the balance in under 6 years. As you continue with the avalanche method, you will continue to reduce the amount of interest paid per loan, as you pay off each balance.

Individual Assessments

Every person has a unique set of budget priorities, and each loan has its own structure and payment schedule. Whether you choose the snowball or avalanche method for eliminating debt may depend on many factors, including motivation.

If saving money is your motivation, you may choose the avalanche method. However, if you’re motivated by seeing faster progress, then the snowball method may be right for you. You may even prefer to consolidate your debts and make only one payment per month on a fixed-interest personal loan. That way there’s no need to juggle payments or recalculate interest charges.

The best financial plans are flexible and enable you to accommodate a change in salary, the addition of a family member, or any other shift in your lifestyle. With the help of the team at Pathfinder Bank, you can find the best solution for reducing your debt while taking care of your other obligations.

Digital Banking Tools

Budgeting is made easier with personal finance tools that help visualize your financial obligations and set goals. Track payments and watch how your debt is reduced and eliminated using your desktop or smart phone. Monitor spending and manage your cash flow. Take advantage of the experience and technology offered at Pathfinder Bank.

For more information, contact Pathfinder Bank at 315-343-0057. Member FDIC.

Switch Your Accounts Today

We live where you live. Investing back into what you care about. Join us!

Switch to Us