Debt snowballing is a method of debt repayment that may be used to clear a number of debts together. With this method of debt repayment, the lowest debt is the one that is initially concentrated on and eliminated first.
Debt Repayment Strategy
The basic way of utilizing this method to reduce your current debts is as follows:
- List all of your debts, starting with the smallest and working towards the largest
- Commit to pay the minimum required on each of the debts every month
- Determine if there is anything extra you can pay off each month, this is then paid off the smallest debt
- Continue to pay anything extra you can afford off the smallest debt until it is cleared
- Then, use the minimum payment from the first debt plus what ever extra you can afford to pay off the second largest debt and so on until all of the debts are cleared
Theoretically, you will have more and more money to pay off the larger debts once the smaller ones have been cleared.
Psychologically, it is easier for people to stay motivated on clearing their debts if they continually have fewer bills, debts and loans to clear.
There are a number of alternative solutions to consider with regard to consolidating your debts. If you feel your debts have gotten out of control where you are barely making your minimum monthly repayments then talk to someone today.
Here at the Australian Lending Centre we have a dedicated team ready to assist you with your financial situation and offer a solution that will suit you, call us whenever you need 7 days a week on 1300 138 188.