If you’re like me, you probably have a number of debts spread across a number of creditors. Now, I like to think I’m careful with money and I’ve certainly also been careful with who I borrow money from and how I pay it back. I’ll always check out the latest 0% transfer deals and I always aim to pay off as much of my credit card balances each month as I can afford.
Well, that’s what it all comes down to –affordability. As long as you know that you can handle your monthly repayments and keep everybody sweet, that’s all that matters. Right? Well, what about if you want to be completely debt-free and have all of your debts paid off early?
Early and quick debt repayment is something many people are starting to take note of. And if you’re paying interest on your credit cards, you’re going to either want to switch to a better deal or be shot of the debt entirely. It’s a sad fact that many people have more debt than they do savings so it’s important to get rid of the debts and then plough your money into some sensible investment opportunities.
Snowball is a method of eliminating your debts by paying off the most expensive ones’ first. Once you’ve done this, you have more available income to focus on the next debt in the list. It’s called snowballing because of the knock-on effect that is created. Not only do you ensure you pay off your debts in an efficient way, but you’ll also have everything paid off much quicker than if you paid only the minimum payment each month.
The more debt you clear with snowballing, the more money you have free to focus on the next debt. Here’s how to get started:
- Make a list of every single debt you have, even the smaller ones. Include store card, loans, and credit cards. You may also want to include your mortgage at some stage, but clear the cards first.
- Arrange everything in order with your most expensive debts at the top of your list. Look at the interest you are paying, how long it’s going to take to repay the debt at the minimum rate each month, and how much you can afford to pay extra.
- You must always keep up minimum payments across all of your debts so make sure you don’t underpay a debt in order to overpay another.
- Keep overpaying on your most expensive debt until you have paid it off.
- Now you can move the money you were applying to the first debt onto the second in your list. And you keep doing this until you have cleared every single debt on your list.
Enjoy being totally debt free!
Snowballing is becoming more and more popular amongst those looking to pay off their debts quicker. Whilst it’s still important to move credit card balances around (it it’s cheaper), snowballing focuses on the debt itself rather than the interest and helps you to prioritise your debts.