Click here to go back to the Credit Repair main page

Did you know that "debt snowball" is a wonderful method to fight off debts?

When you are in a stuck up in a financial crisis and cannot find a way out, you feel horrible right? But debt is like a disease. It can be cured if you choose the right option. Making the choice is like half the task done.

Talking about debt solution, we generally direct out thoughts to some conventional measures like debt consolidation, debt management and even bankruptcy. But did you ever think that you yourself could do a lot in this regard? Have you heard about the debt snowball technique? This method was introduced by one of the most eminent financial expert: Dave Ramsay. This is quite an out of the box debt solution. The basic meaning of ‘debt snowball” is to pay off your debts starting with the smallest amount to the largest loan. This strategy ignores the interest rates and minimum payments. It is guided by the fact that once a debtor pays off his smaller loans, he can utilise the momentum to manage his larger debts.

Though it is a general behaviour to consider the highest interest loans first, Ramsay says "Finances are 20% knowledge and 80% behaviour". So debt solution lies in what is suitable for you rather than following certain conventional notions. At the end of the day it is you who will be benefited and not exponents of various theories.

Here are some facts that can help you to go ahead with "debt snowball":

• Make a list of all your debts first.
• Now select the smallest debt amount so as to pay it off.
• Next you need to increase regular payments and even add more payments to it.
• As for other loans or debts, pay only the minimum amount.
• Once you are done with the first loan, now take up the next debt amount from your list. Start paying it off like the previous one.

Debt snowballing is a process that will continue till all your debts are cleared. This is one of the fastest debt solutions for those who can afford extra money to add to payments. It utilises money efficiently, so you can easily wipe off your debts like credit cards within a short time period.

A debt snowball can be a great innovative way to mange your credit card debt. It might be that you will see small results initially but you will be able to rule out your debts as time goes on. Though this "debt snowball" theory has been propagated by Ramsay to pay off your smaller debts first, for credit cards you may want to make some additions. Contact your institutions to see if you can negotiate a better interest rate or APR. If any of your cards do have a particularly high APR and you can’t get this adjusted, enquire about a balance transfer to a better rate, or indeed pay that one off first before you start "snowballing".

Debt snowball is one of those mainly known methods and can be a great alternative to bankruptcy and other formal debt solutions. It is more a simple tested approach and you can do it yourself if you have the urge to be debt free.