Debt Relief Calculator – Debt Snowballing

A debt relief calculator is a very useful tool in your attempt of debt snowballing. Although not a term heard so often, debt snowballing is most likely one of the most used debt relief system. The term is derived from snowballing – the ability of a snowball to grow in size at a rapid rate while it is tumbling down a hill or mountain. So the purpose of debt snowballing is to get rid of debt in “fast”.

So how exactly does debt snowballing work?

The theory behind it is not that difficult to understand. To achieve such effect, you have to
concentrate eliminating certain debts before the others. All that is needed from you is to list
down all your debts, complete with their interest rates, and outstanding balances. Most
importantly, each debt should be arranged in a particular order.

There are two ways to go about listing your debts in the snowballing method.

1. Arrange the list of your debts according to their interest rates – from higher to lower.

You do this because you would want to pay off your debts with the highest interest rates first.
These debts tend to increase at a higher rate, so the faster you pay them off, the faster you get to
your quest of being debt free. Furthermore, the longer you pay for high interest rates will lead to
paying double or even triple the amount of you have purchased.

This method will prove advantageous to consumers who are dealing with a great difference in
the interest rates of their debts. A good example would be those who have numerous credit cards
that have a big discrepancy in the cards’ interest rates and APR. Eliminating the debts with
higher interest rates puts a stop to the possibility of one’s debt getting more out of control.

2. The second method requires that you sort your loans according to their outstanding balances.

List those with smaller balances first.

In this method, you would want to prioritize getting rid of your debts with the least outstanding
balances. This is a method that should be applied by borrowers whose loans have negligible
differences in interest rates. By eliminating the small debts first, you reduce the amount of
creditors you have to deal with faster, making it easier and more convenient to manage monthly
debt payments. The fact is, borrowers frequently forget to pay debts with smaller amounts. The
reason behind this is maybe because they stress to much about loans with larger amounts which
makes them unintentionally neglect smaller account balances. After all these seemingly
insignificant debt amounts have been eliminated, you can then give more priority in paying off
larger debts.

Of course, in both methods, prioritizing some debts does not mean that you stop paying the other
debts altogether. Pay more than double of the minimum requirement on the debts you are
prioritizing. And for the other loans, keep on paying the minimum each month.