Pay Off Debts with the Snowball Method
If you’re currently able to meet your monthly repayments but want a way to clear your debts faster before they become too much of a problem, then the debt snowball technique could be what you’re looking for.
The snowball is a simple but powerful way of paying your debts, which has the effect of accelerating the impact your payments make, until your debts are completely cleared in a much faster time than by simply paying the minimum each month.
Make Minimum Repayments
The first thing to do is work out how much you need to spend each month to meet the minimums and pay any interest. Set this aside in your budget to ensure that you can meet your commitments.
Add a Little Extra to One Debt…
Next, try and find a little extra to apply to your smallest debt each month. Add this to the minimum amount required, and keep paying this each month until that one debt is cleared, all the while making minimum payments on your other debts.
One Down, X to Go…
Once the smallest debt is cleared, add what you’ve been paying on it each month to the minimum of your next smallest debt. This should boost the payment on it quite considerably, without costing you more each month.
Rinse and Repeat
Keep applying this process to each of your debts in turn, adding the monthly payments from the just cleared debt to the minimum payments on next one in line.
Using the Snowball technique, you’ll find that you clear individual debts more and more quickly, as your repayments become larger in comparison to the interest you’re being charged, and so each payment is working harder to actually clear your debt rather than just service it, without requiring an increase in the overall amount you’re paying each month.
And, once all your debts are finally cleared (which should be sooner than you presently think), you’ll have a very handy sum of money at your disposal every month.
Who is the Snowball Technique Suitable For?
The technique is most suitable for credit card, overdrafts and similar debts which allow any payment over the minimum amount required. Other forms of debt, such as most loans, don’t have this kind of flexibility and so can’t really benefit.
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