The somewhat unusual sounding ‘debt snowball’ strategy is a technique that many chronically indebted people use, as a means to help reduce their otherwise crushing debt burden. As a matter of fact, this technique is not particularly difficult to master once an individual is able to understand it more or less, completely.
Basically, the ‘debt snowball system’ only works if you have multiple credit card debts to your name. In which case, you are required to pay off the smallest debts first while simultaneously making only minimum payments of the larger debts, regardless of however large they may well be.
Once the smaller debts have been more or less completely eliminated, you may than move on to the next bigger ones while following the same approach of paying more for the smaller debts and also trying to keep away your approaching solvency by the fairly simple expedient of making minimum payments of the larger debts, overall.
And provided that you work at it for a sufficient amount of time, then slowly but surely all your smaller debts will be eliminated one by one. Once that has been satisfactorily established, you may subsequently increase the overall payment amounts of your larger debts rather than continue to pay the minimum amounts that you had been making before, to your erstwhile credit card service providers. Eventually, your larger credit card debts would also be paid as well in the long run, and you would then finally be able to live a debt free life once again.
o How does the strategy work?
The ‘Debt Snowball’ method basically aims to get rid of the smallest debts first (regardless of the fact that they are charging low interest rates) and actively encourages the debtor to make only minimum payments of even high interest loans, regardless of how high their interest rates may well be.
According to this method, the sum total of the money that you earn every month will be essentially utilized to pay off the smallest debts first. Albeit, here it is important to make sure that it does not affect your basic living expenses. After all, if you were to cut back on basic necessities, then you just might end up being forced to take even more loans, just to keep your head out of the water, thus effectively continuing the whole cycle in perpetuity.
However, if you have two or more credit card loans whose payables are roughly equal to each other, then many experts advise paying off the card whose interest rates are higher.
However, the best possible solution to getting rid of your debt is to refrain from living beyond your means, as such. Always remember, that the more you spend beyond your means, the more will be the interest added to the principal amount, and you would have to end up eventually paying both.