Of all the debt relief programs, the snowball method is one of the safest and effective ways to get out of debt . When we say safest, it just means that your credit score will not suffer as you pay off your debt. The creditors will not notice that you have a financial problem. You do not need to hire a debt professional to get the job done. This is easily a task that you can accomplish because it simply requires you to change your payment habits so it provides you with early results. Ideally, these early successes will motivate you and thus give you the best chance of completing this debt payment program.
If you have the finances and a steady income to afford the minimum payments of your debts, you can choose this payment method. Those who need a significant reduction on their debts may find it difficult to keep up with the payment demands of this debt relief option.
To use the snowball method, you need to create a budget plan first. The idea is to get the whole picture of your income, expenses and your debts. List down all the cash coming in every month and see where it is being spent. Be as detailed as possible so you can make realistic allocations on the budget that you will create for yourself.
Once you have both a list of your income and expenses, get the difference so you know how much of your income will be left once you have paid for your basic necessities. Whatever amount left is your disposable income which will be put into your debt payments.
The next phase after your budget plan is to create your debt payment plan. List down all your debts and various information that includes the debt balance, minimum payment requirement, due date, interest rate, etc. Rank your debts according to priority – with the lowest balance on the topmost spot.
The disposable income will be allocated to the different debts. The idea is to pay for the minimum amount of all the debts. When you reach the end of the list and you still have extra, you put all of that in the first debt on your list. As you complete the payments on the first debt, you move on to the next and add to the the whole fund dedicated to the first debt. After the second debt, you put the allotted funds from the first and second debts to the payments on the third account.
Since you have prioritized to pay off the debt with the lowest balance, your chances of completely paying off a debt is faster. This is what experts believe will give you the motivation to go to the other accounts.
