To get out of debt fast, pay off your highest interest rate debts first, and then snowball to pay off the rest of your debts. Here’s how it works:
Let’s assume you owe $3,000 on your highest interest rate credit card, a department store card with a 25% interest rate. You are paying about $62 per month in interest. To pay off the card in six months, you will need to pay around $560 per month. Of course each month that you reduce the principal, you also reduce the interest you are paying. If you can afford $560 per month, keep paying that each month until the debt is repaid.
Then, snowball your other debt by taking that $560 payment and applying it against your next highest interest rate debt. That’s snowballing. Your debt repayment picks up speed, just like a snowball picking up speed going down hill, until your debts are repaid.
If you can afford it, snowballing is one of the most effective ways to repay your debt.
If you don’t have enough money to snowball, you may need to try another option, like a consumer proposal.
