Debt Snowball Method: A Step-by-Step Guide to Debt Freedom

When you're deep in debt, with multiple credit cards or loans, you need to budget your debt in order to pay it off efficiently. Multiple credit cards, all with different rates, can really prevent you getting out from under the enormous debt. Using the snowball method of repayment will be efficient, quick and save you money in the long run.

Know Your APR

You must know the rate you are paying on each card. Rank them in order, from the highest rate to the lowest rate. Pay no attention to balances, only interest rates. You want to pay off the highest rates first.

Decide What You Can Afford

You need to determine how much you can reasonably pay each month towards your debt. Create a plan and stick to it, no matter what. You may need to cut back in other areas of your life in order to have extra cash for your debt management.

Implement Your Plan

You will pay the minimum payment due on all of your cards, except the one with the highest rate. You will use the remainder of your debt budget to put all on that one card. Once it is paid off, you take the amount you were paying on that card, and then add it to the minimum payment due on the card with the next highest rate. Continue to pay only the minimum on the others. Eventually you will work down the list until they are all paid off.