Debt Snowballing Explained
Snowballing is all about paying your debts in the correct order. I suggest you pay the debt with the smallest balance and the shortest tenure first. That can help you feel you’re getting rid of the debt quicker thus, creating the momentum.
The idea of snowballing is to single out the debt with the smallest amount and the shortest tenure as your target, and throw all the money you can at it whilst making normal monthly payments on all the other debts.
Once you’ve paid off your first target debt, you then use all that freed-up money to tackle the next one on your list.
You will see that the “snowball” gets bigger and bigger as you have more and more freed-up money after the earlier debts have been settled. If you’d just made the same payments on your list, it would have taken you much longer to clear your debts. By using this method, you’ll be debt-free sonner.
If you are considering a debt consolidation, think carefully about it. It is almost always cheaper to snowball your debt, and often people who consolidate their debts ended up in more debts because they haven’t addressed the main issue: they spent too much.
