The debt snowball method is the strategy of debt reduction, in which a person owing more than one liability settles the debt by starts paying for the smaller one. Once the smaller one is paid, an individual will proceed to the next one which is slightly larger than the previous one.
Explanation of Debt Snowball Method
In this regard, the interest rate is not considered for the debt to be paid first. The debt snowball method can be effective because it provides psychological benefit to the person who is paying the debt each time in full. This strategy empowers an individual to stay on track by showing a clear picture of debts as more manageable throughout the plan. This concept also helps individual in building the confidence and habits of positive repayments by making priorities of the debts. If the plan starts working, the snowball is actually gaining momentum, growing, and an individual will stick to it. Once a person is stick with it, he/she will be succeeded in reducing the debts by paying off all the debts one after another.