what is snowballing, in reference to paying off debt?

Answer 1

serious answer here>>>>In reference to paying off debt......imagine the following scenario.

you have five bills as follows:

1. total due $400.....minimum payment $30
2. total due $500.....minimum payment $60
3. total due $600.....minimum payment $85
4. total due $800.....minimum payment $125
5. total due $1200.....minimum payment $175

The way it works is you maintain a very strict budget. You rank the bills according to amount owed. You do everything you possibly can to pay off bill #1, while only making the minimum payments on the others. On bill #1...pay as much over the minimum as you can (strict budgeting, ie. less spending on junk). As soon as bill #1 is paid off....instead of thinking "cool now i have an extra $30 to spend on junk"....apply that $30 and whatever amount extra you can to paying off bill #2. Remember you've been living without the $30 and extra ANYWAYS. What this does is allow you to pay off bill #2 while still maintaining the standard of living you set for yourself while paying on bill#1 (which is now gone). So once you pay off bill#2....which is faster than paying the $60 minimum since you pay all the extra now, do the exact same thing to bill#3. So the $30+$60+regular $85,and any extra are now gonna pay off bill#3 super fast. This is why its called snowballing....cuz as you pay off more debt and get rid of the smaller bills......you can now pay larger amounts on subsequent bills. You continue this process.....taking money that was spent on paying other bills and applying them to whats left. All this extra money above the minimum is being directly applied to the principal balance....which in turn is less to pay interest on.....and if you maintain a good budget and follow this process YOU CAN GET OUT OF DEBT.

I learned about this from my neighbor who got out of $135K of debt this way. I only have $18K worth of debt...and its working so far.

Good luck towards you effort for financial independence

Answer 2

Snowballing debt: When you pay an exact calculated amount just over the minimum required rigidly and on time over a time period till the debt is resolved. The payments may make meeting the ends a tad tight, but you get used to the payment routine. This is how non-profit credit counseling services help their clients; they are paid a small percentage fee by the debtors.

Answer 3

picture taking a small clump of snow *minimum payment * and then rolling it in the snow. The once little snow ball is now a giant mound of snow. THe snow you are rolling that little ball of snow you can consider as the finance charges and interests rates on the balance. Thats why you should never pay just the minimum payment when making payments because you will find you will never pay off the balance.

Answer 4

too much debt you cant pay, they put intrest on it, and often late charges and the debt just gets higher, then you can never get out from under.

Answer 5

snow men are made from sno balls .
they just have bigger
debt!