Should You Reduce Debt The Debt Snowball Way?

Reduce Debt

Debt can present real pressure, it can impact your day to day life in numerous ways, it can effect your relationship, your ability to simply enjoy life and probably most importantly it can effect your health.

Ideally, no one would use credit – either credit cards or loans. We’d pay for everything with cash. Our grandparents didn’t want or need credit. If someone couldn’t afford something, they simply would not buy it.

Things are somewhat different today and the recession we are seeing is a direct result of the injudicious use of credit; namely, the sub-prime mortgage debacle. If you owe money, especially on a credit card or with a personal loan, you may be asking yourself when will you be debt free.

There is a method of paying off your credit card and loan debts which is gaining currency and helping many to become debt free. This method is called the ‘Debt Snowball’. Experts in finance endorse this method and for many people deeply in debt it has been the solution.

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How Does The Debt Snowball Work?

The Debt Snowball is a process in which you pay of the credit card or loan which has the highest interest rate first. You first make a list of your credit cards and/or loans, ranked from highest to lowest interest rate. You then look at your finances to determine how much money you can set aside towards repaying these debts.

Let’s say that you have four debts, a mixture of credit cards and loans. The highest interest rate would be listed first and so on in descending order.

Next, you would take the money you have set aside in your monthly budget and pay this towards the highest-interest debt. This should be over and above the minimum payments. On the other debts, make only the minimum payments.

Continue until the first debt on your list is paid off and then go on to the debt with the second highest interest rate. Keep paying off the next debt using the same method; adding the extra money you were paying on the first card. Keep this up until all of your debts are paid off.

Just keep on working down this list and paying off each credit card or loan using the same method. With each credit card or loan you pay off, the amount you’ll be able to pay on the next increases. If you keep setting aside that extra money in your monthly budget to repay your debts, you’ll be able to get out of debt fairly quick.

So why pay off the highest interest card or loan first? You’ll save more money this way – the higher the interest rate, the quicker that your debt will grow.

Debt Free At Last

The Debt Snowball method has been used by many people to reduce their debt and become debt free and take control of their lives again. It isn’t necessarily easy; it will take a little sacrifice and some dedication to make this method work and to live your life debt free. By committing to pay off your debts, you’ll find that your mental strain will also begin to lighten.

Once you pay off your debts, cut up and cancel all but one of your credit cards. Keep one to use for emergencies and congratulate yourself on a job well done – and then begin enjoying your new, debt free life!

An Even More Cost Effective Method
Your other option is to consolidate your debt with a low interest loan. You can then take this loan and settle all of your outstanding debts in one swoop. You are then left with one easy to manage lower rate payment per month. This also takes away the pressure of thinking about numerous debts.

By using this method you also avoid the higher repayments costs of higher interest credit cards and loans. Debt consolidation can be a much more cost effective and pressure relieving method of becoming debt free.

Apply for your Debt Consolidation Loan Now and start on the road to eliminating debt and finally becoming debt free.