If you are in debt, you may be searching for a way to pay off debt fast. While paying off debt still means saving up and making the payments, there is a method that will allow you to pay off your debt faster than other methods.
If you want to pay off debt fast, check out the debt snowball system below, and see how the pros recommend paying off debt.
Using the Debt Snowball
The debt snowball technique is one of the fastest ways to pay off debt. It still requires you to have the money to pay, but it is the fastest way to allocate your monthly debt payments to make your debt disappear.
The idea of the debt snowball is to pay off your highest interest rate debt first (since it is your most expensive debt), and then snowballing that same amount of money into your next highest interest rate debt. You continue to do this through all your debt until you pay off your debt.
How does this work? Let’s say you have the following:
Credit Card with $10,000 at 19.99%
Auto Loan with $14,000 at 8.9%
Student Loan with $24,000 at 6.4%
If you are going to use the debt snowball to pay off debt fast, you want to put as much money towards the credit card with the highest interest rate first. You still need to keep paying your minimum payments to the others, but maximize your payments to the credit card.
Once the credit card is paid off, take the payment you were making to the credit card and send it to the auto loan. This will accelerate your auto loan payoff, and get you out of debt quicker.
Finally, once the auto loan is paid off, you take the combined amount you were paying to both the credit card and auto loan, and snowball that total payment into the student loan. With this larger payment, you will pay off debt fast, and get out of your student loan quicker.
By paying off the highest interest rate debt first, you save yourself interest payments. So, it makes sense to go this route if you want to pay off debt fast. If you follow this process, before you know it, you will be debt free.