Benefits of a Debt Snowball Method for Paying Off Debt
Are you feeling the burden of debt and searching for a way to escape? The Debt Snowball Method could be your solution. This strategy involves paying off your smallest loan or credit card first, then applying any extra money towards paying off subsequent small obligations.
This approach offers small victories that spur you on to keep working towards your goal. It also creates momentum, like how a snowball gathers speed and accumulates more snow.
1. It’s a win-win situation
Debt snowballing is a popular debt repayment strategy that allows you to pay off credit card and loan balances in ascending order of their size. This approach can help reduce debt and restore credit score stability if interest rates on smaller balances are higher than expected.
The debt snowball method prioritizes paying off smaller balances first, which can be a motivator. According to Jennifer Rathner, certified financial planner with O’Brien Wealth Partners in Boston, this strategy helps you see progress quickly.
Rathner also notes that debt forgiveness offers a psychological lift, as it feels rewarding to see your smallest debt cleared away. With that money in hand, you can apply it towards repaying other small obligations as well.
Frankel suggests a debt snowball is ideal for most people with typical debt profiles. That includes small credit card balances with high interest rates and larger obligations on lower-interest auto or student loans, she explains.
2. It’s a win-win for your credit score
Debt snowball methods offer several advantages for those trying to pay off debt. Not only does it increase motivation levels, but it can also teach you better money management techniques.
It’s a win-win for your credit score as well. This method helps you pay off debt more quickly, which in turn, leads to an improvement in your score as you make progress.
Furthermore, it can reduce your overall interest payments. This strategy is ideal for those aiming to save money and pay off debt quickly.
Debt snowballs work by paying off your smallest debt first and then allocating any leftover funds to the next largest one on your list. Once that debt is cleared, you can allocate any extra funds towards paying off the next smallest one, until all debts have been cleared!
3. It’s a win-win for your budget
The Debt Snowball Method is an effective way to pay off your debt quickly and efficiently. Popularized by Dave Ramsey, this approach encourages borrowers to list all non-mortgage accounts and prioritize those with the smallest balance first.
Once you’ve paid off the smallest debt, rollover the money from that account into monthly payments for the next-smallest balance. Repeat this process until all debt is gone.
According to The Ascent’s team of financial experts, this approach is ideal for people who seek immediate gratification and desire rapid progress. Furthermore, it gives borrowers a psychological lift which may encourage them to remain committed during challenging times.
However, the snowball method may not be ideal for everyone. Furthermore, since it focuses on smaller balances, you may experience higher interest costs than with another debt-repayment strategy. So be sure to compare credit card APRs and loan interest rates before selecting a debt repayment strategy.
4. It’s a win-win for your life
The debt snowball method is an effective debt repayment strategy that helps you pay off your obligations quickly. It works on the idea that by paying off the smallest debt first, you’ll feel motivated to continue paying down subsequent ones.
This method is ideal for those motivated by quick victories and with the discipline to stick with their plan until all debts have been cleared. Additionally, those with smaller balances or lower income may find this approach more manageable, making debt repayment much simpler to accomplish.
This strategy also helps you recognize your progress, which can motivate you to keep working towards your objectives. By tracking your achievements and rewarding yourself with gold stars for every small win, you’ll be able to stay motivated and reach debt freedom faster than other strategies would allow.