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What's the Debt Snowball method?

Sunday, October 17th

What's the Debt Snowball Method?

If you've been looking at ways to pay off your loans, you may have run across the term "Debt Snowball". But what is it, and how does it work?

Debt Snowball explained

When you start any big project, like paying off your loans, it's easy to become overwhelmed and frustrated. Where do you start? How do you know if you're making any progress?

That's where the Debt Snowball kicks in. With this method of loan repayment, you focus on paying your smallest loans first. Of course, you make the minimum payments on all of your loans - but anything extra goes toward paying off the smallest one.

Once your smallest loan is paid off, throw yourself a little celebration! Go out to dinner, or watch a movie you've always wanted to see. You've accomplished something terrific!

Then what?

Then, take the amount that you were paying toward your smallest loan, and add that to the minimum amount you're paying on your next smallest loan. Once that next loan is paid off, take the amount you were paying toward it, and add it to your minimum payment on your next smallest loan.

Do you see how, with each loan you pay off, the amount you pay toward the next loan increases? That's why it's called the Snowball method. It's like rolling a snowball downhill - the snowball keeps getting bigger and bigger, just like the amount you're paying on your next smallest loan.

The Snowball Method is a great idea. The victories that you get from paying off each loan help keep you motivated toward paying off the next one. It's fun to see your loans get eliminated, one by one.

Here's an example

Let's say you have 3 credit cards - one with a $200 balance, one with a $700 balance, and one with a $1,200 balance. With the Debt Snowball, you would make minimum payments on the $700 and $1,200 credit cards, and put any extra money you have toward paying off the card with a $200 balance.

Once that first card is paid off, you then take the amount you were paying on it, and add it to the minimum payment for the $700 card. And once that card's paid off, you take the amount you were paying and add it to the payment on the $1,200 card.

The good thing about this plan is you see your loans dropping off one by one.

The term "debt consolidation" is often thought of as simply receiving a loan, but that's not the full picture. Debt consolidation involves combining your current loans into one single payment, usually at a reduced rate that can save you a lot of money. If you have ever heard of a loan consolidation company, then you may already know how the process works. If not, let's see how loan consolidation can work for you.

How much money can I save with debt consolidation?

That's a great question. Of course, the amount of money you save will depend on factors such as how much you owe, how many loans you have, and what your credit score is.

However, we discovered some real-world examples that you should find interesting. These are numbers from actual customers who've utilized the services of a debt consolidation company.

  • Old Loan Amounts shows how much money they owed
  • Old Interest Rate shows the APR they were paying on their loans
  • New Interest Rate shows the interest rate they paid on their new consolidated loan
  • Money Saved shows how much money in interest they saved over the life of the loan

This proves that the money-saving benefits of debt consolidation are real!

Financial freedom

Whichever method you choose, paying off your loans can give you the keys to financial freedom. It's certainly worth your time to find the best approach that works for you.

The Best Debt Consolidation Companies Compare Debt Consolidation Companies Compare Debt Consolidation Company Reviews What are the best Debt Consolidation Companies Best Debt Consolidation Company Reviews

Debt Consolidation Company FAQ

Debt consolidation is a strategy used to help consumers get control over high-interest debt and simplify their monthly payments. Instead of having multiple credit card bills and other accounts to pay, often with extremely high interest rates, debt consolidation reduces those individual debts into a single payment each month.
You may need to have a certain amount of unsecured debt to be accepted into a debt consolidation program (for example, $7,500 or more). If you're struggling to keep up with the minimum payments on your credit cards and loans, you could be a great candidate for debt consolidation.
That depends on the service, but yes: most debt consolidation programs give you a loan to pay off all of your outstanding debts. These loans usually have much lower interest rates and can help you get on top of your financial situation again.
Sure! You could try getting a traditional loan from your bank or credit union, borrow money from friends or family to pay off debts, or work on your side hustle to make extra cash to pay down what you owe. But, chances are good that you've tried that already and still find yourself struggling financially. Debt consolidation could help you handle it once and for all.
It should. One of the biggest black marks on your credit score is having late or missed payments, and consolidating all of your debt into one monthly payment makes it more likely you'll pay on time.
That varies. Some providers don't charge anything for their services, offering counseling and other tools to teach you how to manage your money and pay down your debts. Or, if you're taking out a loan to pay off higher-interest accounts, your fees will include your interest and any other charges associated with your application. Be sure to get your plan in writing before you make a commitment, so that you'll know what to expect.
Most of the time, no. If you take out a debt consolidation loan, it's on you to understand all of the terms and conditions before you sign off. However, there are a few fee-based services that do offer a 100% satisfaction guarantee that allows you to cancel without penalty.
Absolutely. Thousands of people use debt consolidation programs every year to tackle their toughest credit problems. It's a good idea to check out the reputation of any program you're considering: find out what other clients say about their experiences, see if the BBB has rated the company, and determine for yourself if their debt consolidation services are worth your time and (possibly) money.

Compare Debt Consolidation Companies

Select any 2 Debt Consolidation Companies to compare them head to head

best-debt-consolidation-companies
  • National Debt Relief
  • Credit.org
  • Upstart
  • Curadebt
  • Liberty Lending
  • LendingTree
  • SoFi
  • SuperMoney
  • LendingClub
  • Payoff
  • American Debt Enders
  • Debt Consolidation Care
National Debt Relief vs Credit.org National Debt Relief vs Upstart National Debt Relief vs Curadebt National Debt Relief vs Liberty Lending National Debt Relief vs LendingTree National Debt Relief vs SoFi National Debt Relief vs SuperMoney National Debt Relief vs LendingClub National Debt Relief vs Payoff National Debt Relief vs American Debt Enders National Debt Relief vs Debt Consolidation Care Credit.org vs Upstart Credit.org vs Curadebt Credit.org vs Liberty Lending Credit.org vs LendingTree Credit.org vs SoFi Credit.org vs SuperMoney Credit.org vs LendingClub Credit.org vs Payoff Credit.org vs American Debt Enders Credit.org vs Debt Consolidation Care Upstart vs Curadebt Upstart vs Liberty Lending Upstart vs LendingTree Upstart vs SoFi Upstart vs SuperMoney Upstart vs LendingClub Upstart vs Payoff Upstart vs American Debt Enders Upstart vs Debt Consolidation Care Curadebt vs Liberty Lending Curadebt vs LendingTree Curadebt vs SoFi Curadebt vs SuperMoney Curadebt vs LendingClub Curadebt vs Payoff Curadebt vs American Debt Enders Curadebt vs Debt Consolidation Care Liberty Lending vs LendingTree Liberty Lending vs SoFi Liberty Lending vs SuperMoney Liberty Lending vs LendingClub Liberty Lending vs Payoff Liberty Lending vs American Debt Enders Liberty Lending vs Debt Consolidation Care LendingTree vs SoFi LendingTree vs SuperMoney LendingTree vs LendingClub LendingTree vs Payoff LendingTree vs American Debt Enders LendingTree vs Debt Consolidation Care SoFi vs SuperMoney SoFi vs LendingClub SoFi vs Payoff SoFi vs American Debt Enders SoFi vs Debt Consolidation Care SuperMoney vs LendingClub SuperMoney vs Payoff SuperMoney vs American Debt Enders SuperMoney vs Debt Consolidation Care LendingClub vs Payoff LendingClub vs American Debt Enders LendingClub vs Debt Consolidation Care Payoff vs American Debt Enders Payoff vs Debt Consolidation Care American Debt Enders vs Debt Consolidation Care
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