Debt Snowball (Stacking)

Often referred to as "Debt Snowball" or sometimes "Debt Stacking", both terms are synonymous.  These strategies are approaches in paying off the debt in the most meaningful and efficient manner possible.  It consists of both mathematical and psychological formulas that may sound difficult but in practice is very easy and simple.  


Let me first state that I understand what it is like being in debt.  At 18, I quickly fumbled into credit card debt without a full-time job because I wasn't taught the basic principles of managing money.  Nor did I understand the impacts of interest payments and its devastation it can cause. 


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On this page, I want to share with you an approach that financial institutions apply because it is effective and saves money in interest payments. 


Step 1  Devise a Plan:

Sort and organize your debt by the highest interest rate to lowest.  Next, determine which bill has the lowest balance that can be paid in 2-4 months.  After creating your priority list, it is time to devise a plan to be debt free.


Write down the monthly payment amount due from each bill.  The payment plan should help you to pay off the priority loans easily so you will be making minimum payments on the bills ranked from #2 and on.  This focuses the payments on bill #1 to quickly pay that off so in the next month once paid off, that payment can be applied to debt #2. 


So try to put all the extra money towards the payment of the loans. You can also make double payments to decrease the repayment amount. In case of the other smaller loans, you can make the minimum payments until you are ready to pay them off.


Step 2  Establish Automatic Payments:


To be debt free quickly, use the automatic repayment method. The best option to make timely repayment is to set up an automatic repayment from your bank account. This can save you a lot of time and also be assured that the payments will be made on time. There is no need to fear about deferring the payments. However, ensure that your account has the amount during that time. By following these procedures, you can easily clear all your debt to be debt free.


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