How the Snowball Debt Payment method can smash debt
If getting out of debt faster and and saving money on interest payments is your thing then keep reading...
What is the snowball debt payment method?
The snowball debt payment method is a debt repayment strategy where you focus on paying off your smallest debts first.
The psychology behind it is the power of small wins.
Research by professors at the Questrom School of Business, Boston University in 20161 discovered that "focusing on paying down the account with the smallest balance tends to have the most powerful effect on people’s sense of progress – and therefore their motivation to continue paying down their debts"2
It's very simple;
- You make the minimum payments on all your debts except the one with the smallest balance.
- For the debt with the smallest balance, you pay as much as possible, over and above the minimum payment, until it's paid off and then;
- move onto the next smallest until you're debt free!
Thriday makes this even easier, you can create two bank accounts* dedicated to paying down loans:
- Use the first bank account* to transfer as much money as you can spare to pay down the smallest debt
- Use the other bank account* to store the combined minimum payment for the other debts so the money is set aside, and you don’t have to think about it
You can set each of these accounts up in a couple of clicks:
How does the snowball debt payment method save you money?
The snowball debt payment method gets its name from the momentum created as you pay off each debt.
With each debt you pay off, you have one less debt to worry about and more money available to put towards the next debt.
This makes the process of paying off debt less daunting and can save you a lot of money in interest payments.
The snowball debt payment method can save you money on interest payments because you have a lower overall balance as you pay off your debts.
This means you'll be charged less in interest each month; potentially saving you a lot of money over time.
How to use the snowball debt payment method
Now that we've explained how the snowball debt payment method works, let's talk about how to use it effectively.
- First, you need to make a list of all your debts, including the balance and interest rate for each
- Next, calculate your minimum repayment for each debt
- Finally, once you have this info, you can start working on paying off your smallest debt first
Remember to make the minimum repayments on all your other debts and put as much money as possible towards the smallest debt until it's paid off.
Once the smallest debt is paid off, you can move on to the next smallest debt until you're debt free!
Following these steps can help you get out of debt faster and save money on interest payments.
Using the snowball debt payment method can help you get out of debt faster!
It's simple, and it works. Just the way we like it.