Whether you have been working towards getting out of debt for several years, or you are new to the game, one of the most effective ways of paying off debt is the debt snowball. Applying the debt snowball strategy to your debts will save you a lot of money in interest charges while getting your debts paid off much, much faster. And you never have to pay out any more per month than what your current minimum payments are.
How the debt snowball works:
Make a list of all your debts.
Order them from the smallest dollar amount to the largest.
Make the minimum payment on each debt every month.
Optionally, add any extra money you may have to the debt on the top of the list.
Once the first debt is paid in full, cross it off the list and congratulate yourself!
Now, and this is where the snowball gets going, apply the money you were paying on the debt you just paid off to your next debt. So if your first debt was $50 a month and your second debt is $75 a month, you will now be paying the total of both, $125, toward your second debt.
Repeat until all your debts are paid.
Let’s say all your minimum payments added up to $800 a month. By the time you have all but the last debt paid off, you will be paying $800 a month on that last one. Now that is a fast moving snowball!
This is all pretty cool, but let’s say you would like to know how much money you could save. Or how much faster you could be debt free? Or how much more money you’ll save if you make an extra payment? Or better yet, if you add an ongoing extra payment? If you knew these answers, it would really help you keep excited about sticking to your commitment. But it would take a lot of math and calculating to figure all that out by hand.
Is There Software To Help You Do All This?
That is where debt elimination software comes in really handy. And it makes putting together your “get out of debt” plan really simple. All you have to do is put each debt into the software. And it will automatically calculate all the hard-to-figure-out numbers for you.
Most software packages will allow you to put in your debts. Then they will create a debt payoff report for you, showing what to pay on each debt each month. The better packages will also allow you to enter either a one-time extra payment (for the yearly bonus), or an ongoing extra payment. Really nice ones will even let you change an interest rate mid-way through your payment plan. This lets you handle a mortgage rate change, for example.
Be Debt Free America is one of the really nice packages. It allows for all the above and even comes with a few handy calculators. After you enter you debts, the site will tell you immediately how much money and time you will save by following the debt payoff plan. You can check out a sample debt elimination page where you will be able to see the functionality of the site.
This service automatically orders your debts from highest interest rate to lowest as this generally will save the most in interest charges. However, based on certain calculations, it may put one or two at the top. Paying off one or two really fast will keep you excited. Either way, you can manually change the order if you want.
Be Debt Free America is also a pretty inexpensive service. Okay, it is free. At least for the first four debts. The free version also has a few limitations. There is a premium version that allows for unlimited debts and has all the features available.
To learn more about increasing your debt elimination efficiency, please visit www.bedebtfreeamerica.com where you can learn how software can help you get out of debt fast.
Money saving tips - lower your monthly expenses!
Not sure which debt relief option is right for you?
We recommend contacting a debt counselor to discuss your options:
