What is this brilliant tip that will help you pay off your debts quicker AND save you money?
It’s called snowballing and it really does work.
And before you ask, when I say snowballing I don’t mean throwing actual snowballs, I’m referring to paying off your credit cards and other unsecured lending in the most cost efficient way possible.
It’s all about paying your debts off in the right order so that you pay the least amount of interest on your debts and pay them off as quickly as possible. The best way to do this is to pay the minimum payment each month on all of your outstanding debts and use any extra money you have leftover in your monthly budget to pay more to the debt with the highest interest.
Then, when the first debt is fully paid off, instead of having extra money each month, you should use the money you would have been paying the first debt with to start paying extra to the debt with the next highest interest rate.
Once the next debt is paid off, move on to the next one and so on until you’re all paid off and debt free (in an ideal world). Then you can then start paying extra on your mortgage or just enjoy having the extra money in your bank account each month.
It’s called snowballing because each time you pay a debt off, rather than getting used to having the extra money, you just put it towards paying off your next debt. So each time you pay off something, the payment to the next debt gets bigger, meaning you pay it off quicker and therefore, you pay less interest.
Does that make sense?
There’s a calculator that can help you work out which order you should be paying your debts off in here but it’s quite easy to work out yourself if you just gather up a statement from each account so you can put your debts into order of the highest interest rates.
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When paying off debts, it's easy to miss this excellent advice. Maintaining composure is essential when navigating a complex financial situation, and this advice is spot on.
This is great advice and something so easily overlooked when paying off debts. Getting out of a tricky financial situation requires a calm head and this advice is perfect.
Thank you very much for this advice…I think it will really work for me as it worked for others.
We did this and paid off £45k in a little over two years – I was working three jobs but we did it
Thanks for giving such a great piece of advice . Everyone in this world wants to save his money and I think it's a good way of saving as it's very simple as well.
Thanks very much
We’re coming to the end of our snowballing this month, with the DD for the credit card finally going to clear it. We’re going to put aside the spare money in a savings account for a few months so we have a back up fund for the likes of heating oil etc so we don’t have to rely on the credit card for emergencies. I can’t wait to be debt free (bar the mortgage!)
Ooh I bet that feels good x x
Great money advice, I started to do this a couple weeks ago and it works great for me, I've found it so much easier and more simple.
Sarah @ Goodheart Gifts.
Brilliant – good luck x
Good advice – I know when we had a few hundred pounds of debt earlier last year we found it easy to forget what was most important so we combined it onto one interest free card for 16 months and set up a direct debit for the exact amount we needed to pay each month to clear the card and we tore the card up so no more went on it.
That's the trick – getting rid of the card when you're done!
Well done you x