The debt snowball method allows you to repay your revolving credit debts in an organized manner. Revolving credit typically means credit cards in which you have a continuous line of credit that you pay down on a monthly basis. The debt snowball method has gained popularity in the last few years as a result of its effectiveness. We are going to look at how the debt snowball method works to help you decide if it is right for you.

Steps for Debt Snowball Method

The debt snowball method allows you to list every debt you have. You should list these debts in ascending order with the smallest to largest debts. Along with the total amount of debt you need to list the interest rate or APR you pay.

Once the list has been generated you need to list the minimum payments for each debt. The minimum payment is the amount the company requires from you on a monthly basis. You must pay at least the minimum payment on each debt.

The next step in the debt snowball method requires you to know your income and other expenses. You need to know how much additional income you can pay towards the smallest debt. For example if you earn 2000 dollars a month, and without including your revolving debt you know you owe 1200 dollars to other set monthly expenses, gas, and groceries, then you have 600 dollars left over for the credit cards. If you have revolving credit debts and the monthly minimum adds up to 400 dollars you have 200 dollars left over. The two hundred dollars should be applied to the lowest debt.

You will continue to pay the minimum payment plus the extra 200 dollars to the smallest debt on the list until it is paid off. Once that debt is paid off you will begin on the next smallest debt. This process will be continued until all debts are paid off.

Purpose of the Snowball Method

Now that we have looked at the steps for the debt snowball method let’s look at the purpose. This method was designed to help you pay of your debts in a timely manner. The example above tells you how to pay them down you were paying 200 to the first debt plus the monthly payment. Say the monthly payment on the first debt was 40 dollars. Once that debt is paid off you are taking 240 dollars plus the minimum payment on the second smallest debt in order to pay it off. If that debt was 50 dollars a month you are now paying 290 dollars every month. When you get to the last debt you should be paying the three previous monthly payments, plus the 200 dollars extra, and the last debts minimum payment. So if the third debt minimum payment was 60 dollars you would have a total of 250 dollars plus the minimum payment on the forth card.

The reality is you are paying more each month to each revolving debt as you pay one off in full. This allows you to pay the debts of in a timely manner without defaulting on one debt. If you are skeptical about the process try it for six months and see if it works for you.

Brad is the creator and editor of Debt-Free-Destiny.com, a website with easy to follow information on how to get out of debt, budget and save money, and build wealth.

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