
Financial advisers talk about getting out of debt by putting your debts in order of the highest interest rates to the lowest. The idea is to pay the minimum payments on the lower interest rates and throw all your extra money towards the highest interest debt first. In theory, this is a good idea to save you interest costs, but what if your higher interest debts have large balances and the lower interest ones have smaller balances? It can take a long time to pay anything off. The debt snowball method works better for many people because the psychological feeling of getting out of debt motivates them to stick with it.
The Debt Snowball method is to put your debts in order by balances owed. You start throwing all the money you can at the smallest balance, while paying the minimum payment on the other balances. This way you start paying off debts quickly and end up with fewer to worry about as you work your way to the highest balances. Both methods mean never reducing the amount you put towards payments, but Debt Snowball works better for many because they feel like they are getting out of debt easier.
What I Like About This...
Having struggled with debt and trying to find a way out of it without resorting to bankruptcy, I learned about this method while researching my options. Although I've always thought it was best to pay off higher interest rate loans first, I do see the psychological benefit of going after lower balances first.
To compare the difference, I plugged the numbers into a debt snowball spreadsheet calculator and the difference wasn't that significant. Not only that, it also gave me a visual plan for tackling debt that is realistic. I give the debt snowball a thumbs up.


Having struggled with debt and trying to find a way out of it without resorting to bankruptcy, I learned about this method while researching my options. Although I've always thought it was best to pay off higher interest rate loans first, I do see the psychological benefit of going after lower balances first.
To compare the difference, I plugged the numbers into a debt snowball spreadsheet calculator and the difference wasn't that significant. Not only that, it also gave me a visual plan for tackling debt that is realistic. I give the debt snowball a thumbs up.