QUESTION: How to choose a repayment strategy: avalanche or snowball?

The strategy called Avalanche involves concentrating all available financial resources on paying off the loan with the highest interest rate, regardless of the total amount of debt. This approach is mathematically optimal because it allows you to save the maximum amount of money on interest and reduce the total overpayment to the bank. After the most expensive loan is completely closed, the freed-up amount is added to the payment for the next most expensive loan.

The method called Snowball focuses primarily on the psychological side of the issue and maintaining the borrower's motivation. Within this strategy, you direct extra money to pay off the debt with the smallest remaining balance, regardless of the interest rate. Quickly closing at least one small loan brings moral satisfaction and creates a sense of victory, which helps not to give up the started process under the debt load.

To make the right choice between these two strategies, assess your emotional state and level of discipline. If you are prone to burnout and quick intermediate results are important to you to maintain enthusiasm, choose the snowball. If your goal is pure financial gain and minimizing debt servicing costs, the avalanche strategy will be the absolute leader. The main thing is to choose the plan that you can maintain throughout the entire repayment period.