DEBT SNOWBALL AKA (DEBT ROLL-UP)

The overview is you pay more a month than your monthly minimum. Let’s say your over all MINIMUM payment on all your debts is $700 dollars a month and you can find $100 or $200 extra dollars in your household budget to apply to your debt each month you will create a snowball effect in paying down your debt. Depending on how much extra money you can apply monthly to the debt will dictate how long it will take to pay off your debt.

If you pay just the minimum every month you are looking at a 20 year pay off term!!! However, if you apply the snowball method you are looking at an average of 2-5 year pay off period.

How it works:
You make a list of all your debts. Rank them by balance size and not interest rate. You start applying the extra money every month to the smallest balance. Once that balance is paid off you apply all the money from that debt to the next largest balance. This will create a snowball effect in paying off your debt. It is very important that you pay the minimum on all other debts to keep your accounts in good standing and not create more debt by paying late fees.

Pros:
Legally and ethically reduce your debts.
Does not destroy your credit
Helps you budget your money

Cons:
Takes time and discipline
Not quick and easy
Must create a budget
You must be really motivated!

We will address the other two methods of debt reduction soon:
DEBT CONSOLIDATION
DEBT SETTLEMENT or DEBT NEGOTIATION