The huge advantages of debt snowball

Paying all of your debts as soon as possible is an ideal that can be put into practice by using the debt snowball method

12:58 18 September 2013

It's never easy to find good ways to get rid of all those debts, but there is one way to help you that does not require extra funds. This is called a debt snowball, and it basically means that you start by repaying smaller debts and use the savings to repay the next smaller debt. Here are the steps that you need to follow if you want to get the debt snowball to work in your favour:

• First of all, make a list with all of your debts and sort them from lowest to highest. You need to know exactly how much you owe and which debt can be repaid sooner if you want to start the debt snowball;

 

• Leave aside debts that are too large to repay at the moment, such as mortgages or expensive car loans. When using the debt snowball, you deal with those later on, when you will have saved enough from removing the interest costs of other smaller debts;

 

• Make a list of all of your incomes, so that you know exactly how much you are able to repay each month. Try to use as much as you can out of that income for debt snowball;

 

• track the lowest debt and allocate the maximum amount you can to repay it, while repaying other debts with the minimum amount possible – the idea behind debt snowball is that you prioritize your debts and deal with them in time;

This is how debt snowball works, by helping you remove all of the loan interests you currently pay, one at a time. The main advantage of this method is that you don't actually have to use more money than you already use for debt repayments – you just use it in a smarter way.