The debt snowball plan is a debt repayment strategy that focuses on paying off the smallest debts first and then moving on to the larger ones. The idea is to pay off the smallest debt as quickly as possible, and then use the money that was being used to pay off that debt to pay off the next smallest debt, and so on. This process continues until all debts are paid off. The snowball method is designed to provide early victories and motivate people to continue paying off their debts. Here are the steps to follow when using the debt snowball plan:
- List all of your non-mortgage debts in order of their balances, from smallest to largest.
- Pay as much money as possible each month toward the smallest debt while making minimum payments on all other debts.
- Once the smallest debt is paid off, take the money that was being used to pay off that debt and roll it onto the next-smallest debt owed.
- Continue this process until all accounts are paid off.
While the debt snowball plan may not save as much money as other debt repayment strategies, it can be an effective way to pay off debts and provide motivation along the way.
