How to Use the Debt Snowball Method to Guard Your Credit

If you have let your debt snowball out of control, then you will probably need to make use of an effective and proven method of paying it down like the Snowball Method. This method of liquidating debt was originally conceived of and made famous by personal finance guru and radio talk show host Dave Ramsey.

According to this model, it is the momentum not the math that makes it easier to pay down your debt.

Pay Down Your Tiniest Debt First

The way that you do this in practice is to list out all of your credit card debts according to the amount owed. You begin by first paying down your tiniest debt, then move up to the next smallest one, paying them off one by one. Keep moving up the credit card size ladder until they are all paid off.

The key is that these early and easy to achieve small wins will not only build your confidence but will give the necessary momentum to attack the larger piles of debt towards the end.

Pay Down the Highest Interest Rate Accounts First

It is the opposite of the debt avalanche model of attacking debt by paying down the highest interest rate accounts first, then moving down the interest rate credit card ladder until they are all paid down. While the Debt Snowball may be easier to follow, without a doubt the debt avalanche method saves you money in the long run and pays the debt off faster. The reason is because by paying down the card with the greatest interest rate later, you let it sit and continue accruing interest. 

This means that you will pay back a small fortune in interest using the Debt Snowball method. 

Pay More – Not Only the Monthly Minimum

If you do opt to use the Debt Snowball method, your goal should be to pay not only the minimum monthly payment on this smallest balance account, but also an additional $100 per month. Then when you finish paying down the first debt, add the minimum monthly payment you were making to the hundred dollars and apply this towards the next smallest debt. 

In every case, you should always make all minimum payments on all accounts during the process, or you will destroy your payment history on your credit report. Remember that this is the single most important category, and you should defend your timely monthly payment history with every breath in your body. 

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