The debt-snowball method is a popular and highly successful method of debt management that has allowed many people to pay off all of their credit cards within a few years or less depending on how much they were in debt when they first began the program. The debt-snowball method has been preached by Dave Ramsy for some time and this is also a significant factor in its increased popularity.
The debt-snowball method is simple, but many people don’t think of it until they have someone explain it to them. The method contains only a few easy to follow steps. First, the person must list all his debts in order from smallest to largest. If two debts have a similar balance, then he should payoff the debt with the largest interest rate first. It may make more sense to pay off all the debt with the largest interest rates first, but an important factor of the debt-snowball method is the role that psychology plays. The borrower takes on a more positive attitude when he sees fewer bills every month. If the borrower has the willpower, it may be better to pay off the balances with the highest interest rates first, but this theory is not part of the debt-snowball method.
While still paying the minimum payments on all the other debts, the person then finds the maximum payment he can afford to pay on the smallest of the debts and then commits to paying it until that debt is paid off. When that particular debt is finally paid off the person then takes the debt with the smallest balance of those that remain and continues the process as before, except now he can afford a larger payment as he no longer needs to make a payment on the debt that has just been paid off.
The Debt-snowball method receives its name because in theory the amount he is able to make towards the current debt that he is acting towards paying off gradually gets larger and larger, like a snowball rolling down a hill, gathering more snow and becoming larger. It’s not certain where the name originally came from, although many believe it was penned by Dave Ramsy.
Any investment contributions or retirement funds are halted during the debt-snowball method as paying off Debt should take the highest priority. Many people disagree with this theory and Ramsy himself claims that investment spending should be halted for no more than 3 years. Some followers of the debt-snowball method compromise by continuing to make minimum payments to their retirement funds. It’s also important to note that mortgages and other large debts do not play a part in the debt-snowball method.
While there are a few people who disagree with it, the debt-snowball method has shown a lot of results and continues to grow in popularity. While it may not be perfect, it is a simple and time-tested approach for getting out of debt and can be a great substitute for credit-counseling, debt-settlement, and bankruptcy.
Got a Question? Ask.
Ask the community a question about this article:
Frequently Asked Questions
My hun%@aol.comsband and I filed chapture 13 and ...
By: alb | 15-08-2008
My hun%@aol.comsband and I filed chapture 13 and have not been able to keep up with the repayment plan and are now behind. We filed chapture 13 because we owned a home. At the hearing we told our lawyer that we could not afford to keep the home. He said go on with the bankrucy as is and deal with it later, that was a year ago . We lost the house 4 months ago and now have rented (rent are very high here because so many people are losing their homes) an apartmnet. My husbands earning have been going down and I am retire. We can not keep up with the payments. We find it hard to pay the daily living bills and now the creditors are starting to call again. My husband has told the lawyer and trustee that we can't afford to do the monthly payment. They just keep telling him to try. Is there any thing we can do. I don't know what to do or where to go.
How do I get a credit card company to negotiate
By: WorkingMom | 11-08-2008
How do I get a credit card company to negotiate a payoff like the debt consolidation companies do?
I am going through bankruptcy (3 yrs) and my ...
By: Jody | 09-08-2008
I am going through bankruptcy (3 yrs) and my landlord has asked me to move, i was told that it is a state law that she cannot put me out until i have completed my bankruptcy course (7 yrs.)--Is this true?
Sister
Should I declare bankruptcy?
By: snoopy52 | 07-08-2008
We need assistance in someone to tell us what to do. I am in the middle of a break up/divorce after 11 years. We have been together that long, just never got married. We have a combined est amount of $15k in credit card debt and about $265k in home loans for the 1st and 2nd mortgages. The house is worth about $240k according to the few agents I have spoken to. We are trying to figure out which option is best for us. Should we just do a bankruptcy thing and let the house go and get the credit cards written off or should we do a short sale and then get a personal line of credit to separate the credit cards and just pay that off over the next 8 to 10 years. If we do bankruptcy, how long will it take to get our credit ratings back up? I am open to either a short sale or bankruptcy, just trying to figure out what is best in regards to getting this mess behind us and what would be best for our credit score.
Can a debtor file a bankruptcy for the sole ...
By: lelandwmckee | 07-08-2008
Can a debtor file a bankruptcy for the sole purpose to eliminate "one" judgment against them or this is the primary reason they filed? Wouldn't this constitute fraud of the bankruptcy system?
Can a creditor take you to court 6 years after chapter 7 bankruptcy was dismissed?
By: flyer | 07-08-2008
If you file chapter 7 and it is discharged can a creditor who sold their company to another take you back to court for the debt claimed on the bk?
Q&A Powered by:
Latest Debt Consolidation Articles
Debt Consolidation: How to Choose Your Financial Consultancies
By: Minkesh Sood | 11/10/2008
Today consumer burdened with debt is looking for total financial freedom. Due to increasing number in debts taken by consumers the graph of financial consultancies who are working on debt settlement consultancy are growing day by day.
Bankruptcy Myths Exposed!
By: John Elton | 11/10/2008
Myths surrounding bankruptcy are many. Some are real, some are not. People avoid filling for bankruptcy when they are true need of it just because they are scared of it. The article intends to raise the curtain over the myths related to bankruptcy.
How to Encounter Debts With Debt Consolidation Loans
By: Minkesh Sood | 10/10/2008
To overcome debts is wish of every individual but in many situation people do not know how to get out of it and omit there debts. A Debt Consolidation Loan will help you in encountering your debts and from able to make your finances improved.
Ways to Get Home Loan Refinancing Quotes
By: Steven Walters | 08/10/2008
Home loan refinancing is a huge decision and getting a good refinancing loan can save you tens of thousands of dollars over the life of your mortgage. Find out easy ways to refinance your home loan online.
Debt Consolidation Loan : Advantages That You Should not Miss
By: Julian Lim | 07/10/2008
Debt consolidation loan has its share of advantages as well as disadvantages. However, for many people, the benefits of debt consolidation loan clearly outweigh the disadvantages. Some of this loan’s benefits that you can enjoy include low interest rates, easier monthly payment and reduction of stress and worries.
A World in Debt
By: Ricardo Reeves | 07/10/2008
The world's economy is in a state of flux. In such an environment it is imperative to get your finances in order.
Christian Debt Consolidation
By: Karl Caprio | 07/10/2008
A leading debt consolidation company offers Christian debt consolidation and student debt consolidation loans and services along with credit card debt consolidation, reduction and settlement programs to consolidate your debt in a single low interest loan.
Debt Consolidation Loan
By: Karl Caprio | 07/10/2008
Debt consolidation and credit card debt settlement services in USA including fast and free quote to reduce credit card debt, bad credit or bankruptcy loans consolidation, consolidate bad debts and lower the interest rates with only single monthly payment for students & soldiers also.
More from Usha Pradhan
What Does Interest Mean When Dealing With a Payday Loan
By: Usha Pradhan | 23/07/2008 | Loans
When you are dealing with something like interest on a payday loan, it is a little bit different. That is why we are going to talk about the different kinds of interest and what they really mean. That way, when you hear this word when singing up for a payday loan, you know that it is not a good thing.
Instant Payday Loan, Finding the Right One for You
By: Usha Pradhan | 23/07/2008 | Loans
For the most part, an instant payday loan could be just the answer that you are looking for if you are in a hard spot. Let's face it. Money does not grow on trees, and we need help sometimes!
Getting the Money You Need From an Instant Loan
By: Usha Pradhan | 11/07/2008 | Loans
When you are trying to get money now, there is no better way than an instant loan. This is the best way to get money, because if you are looking to get a loan, more than likely you need to get the money now. When it comes right down to it, there are two main ways to get an instant loan.
Getting the Funding You Need
By: Usha Pradhan | 11/07/2008 | Loans
Sometimes in life, you need to go out and look for funding. Most of the time we can make it on our own money, but every once in a great while life will come at you fast, and you may not have any money saved up. This is where funding companies come into play to help you.
A Fast Cash Loan is Perfect for Everyone
By: Usha Pradhan | 11/07/2008 | Loans
This world moves at the speed of light, and I guess that is why a fast cash loan is perfect for everyone. In this day and age, if it's not fast, then it's not worth your time. That is mostly because the world does not wait for anyone.
Getting an Easy Payday Loan
By: Usha Pradhan | 09/07/2008 | Loans
Everyone should know what these kinds of loans are, and they should know that an easy payday loan can save your butt if you ever find yourself in trouble. Now let's get on to the differences between a normal loan and an easy payday loan!
Debt Settlement, the Light at the End of the Tunnel
By: Usha Pradhan | 09/07/2008 | Debt Consolidation
Debt settlement can be your light at the end of a dark tunnel if you are in need of help. This is a great way for you to settle on your bills and loans once and for all, and get them taken care of. After all, we all should be able to live a great life free of debt.
What is Credit Counseling and How Can it Help You
By: Usha Pradhan | 09/07/2008 | Credit
Credit Counseling is something that a lot of people use. This is something that can help save your life if you are in great need of some counseling for your money. Just to set the record straight, credit counseling is known as debt counseling in the United Kingdom.
Finance 
