Snowball Debt Reduction: Which Method Is Best For You?

There is always a lot of heated discussion on which is the best method to reduce debt: the classic highest interest snowball method:

1. Make a list of all your debts, ordering them from highest interest rate to lowest interest rate.

2. Set aside a specific amount of money that will go toward paying these debts each month.

3. From the amount you set aside, make the minimum payment on all debts. Whatever money is still left over goes toward the debt with the highest interest rate.

4. When you finish paying off the debt with the highest interest, continue the same method. You make the minimum payment on all debts, and all of the extra money goes toward paying down the debt with the now-highe

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6 Responses to Snowball Debt Reduction: Which Method Is Best For You?

  1. Vivian says:

    I am now firm believer of paying off any loan as quickly as possible. It really makes life much easier. It has put me on the fast track of getting out of debt.

  2. Pingback: Carnival Of Debt Reduction #85: The American Way Of Debt Edition

  3. Heather says:

    One argument in favor of paying off the lowest balance first that I’ve never seen discussed is that if you eliminate a required monthly debt and its associated minimum payment, you also reduce your necessary living expenses to keep in an emergency fund should you lose your job. When my company was in the midst of layoffs, you’d better believe that I was throwing all my money at the lowest balance debt to try and eliminate that payment completely.

  4. Ty says:

    I mean, seriously? People need to understand they cannot mix emotional decisions with financial ones. I understand a home purchase is emotional, etc., but if you truly want to be free of debt and living off of others, you need to look at your financial picture from an objective mind. I can only hope that people will understand going forward that there is a difference between the best decision and a good decision…

  5. Steve says:

    You see this method is great. If you have no problem staying current and on top of your bills. But for a lot of people even staying with the minimum payment is to much, let alone setting aside extra money to really pay it down. But then whichever way one chooses to reduce their debt really depends on the specific situation they are in. You see someone that can’t keep up with their bills is a better candidate for debt settlement. If that is even still to much to handle than BK. The debt snowball is a very effective method, however it is only for people who have a pretty decent control factor of their debt situation in the first place.

  6. Bill says:

    Debt reduction is huge business these days. Be leary of someone who promises you the world without telling you the pitfalls. A good company will be accredited by the Better Business Bureau, will be low-priced, and will explain the advantages and disadvantages.

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