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The debt snowball method is a debt-reduction strategy where you pay off debt in order of smallest balance to largest balance, gaining momentum as you knock out each balance. When the smallest debt is paid in full, you roll the minimum payment you were making on that debt into the next-smallest debt payment. PLEASE CLICK FILE AND SAVE A COPY / RENAME.
The snowball method involves these steps:
♦ First, list the debts you want to pay down in order of their balances, from smallest to largest.
♦ Pay all the minimum payments. Then, put any extra money toward the smallest debt.
♦ After the smallest debt has been paid off, put your extra money toward the next smallest debt.
♦ Continue to allot your extra payments only toward the smallest debt until all of your debts have been paid in full.
Unlike with some other repayment methods, interest rates are not a factor in how you prioritize your debts with the debt snowball method. So, this strategy may not be ideal if you are trying to save the maximum in interest. However, for some people it can be more effective because of the psychological benefits of achieving a "win" each time a debt is paid in full. This can encourage you to continue putting your extra money toward your debt.
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