A BUDGETING expert has explained how people can use the snowball method to clear their debt as quickly as possible.
Popular TikToker @youneedabudget demonstrated how the method works, which starts with paying off the smallest debts, and why it can be great idea for some people.
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In an interesting and informative video, the expert began: “The snowball method is where you list of all of your debts and you pick the one with the lowest outstanding balance and put extra money into it.”
She said people should also keep making the minimum repayments on the rest of their debt though, or you could rack up costly charges.
“Once the money is gone, you take the money you’ve been putting towards that one and put it towards the next smallest one,” the TikToker continued.
“You do that until all of your debt is gone. Compared with a wide-net budget, it works very well.”
Fans of the “snowball method” believe that paying off smaller balances can keep people motivated and on track as you get the satisfaction of knowing you have paid off a debt or closed an account.
One person wrote in the comments: “It worked amazing for us because we felt accomplished every time we paid off the smaller ones and felt we could tackle the big ones.”
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“I’ve done this during this pandemic. Now I only have 3 cards left,” said another.
It can also to – some extent – help boost your credit score, says James Jones, head of consumer affairs at Experian.
He said: “If you can reduce your borrowing then this is good news for your credit score, regardless of which accounts you pay off first.
“This is because an important score factor is your total unsecured debt, so whichever route you take to becoming debt free is likely to ultimately lead to a similar score outcome.”
How to get help for free
THERE are lots of groups who can help you with your problem debts.
- Citizens Advice – 0808 800 9060
- StepChange – 0800 138 1111
- National Debtline – 0808 808 4000
- Debt Advice Foundation – 0800 043 4050
You can also find information about Debt Management Plans (DMP) and Individual Voluntary Arrangements (IVA) on the Money Advice Service website and on the Government’s Gov.uk site.
Speak to one of these organisations – don’t be tempted to use a claims managment firm that will say it can write-off lots of your debts in return for a large up-front fee.
However, the snowball method isn’t the only option to pay off debt and there are other approaches that might suit you better.
Another popular approach – the avalanche method – encourages people to focus on the debt with the highest interest rate first.
This will save you more money in interest than the snowball, but it can be less satisfying, so you need to dig deep to find the willpower to stick at it.
You could also opt in for a hybrid method, mixing in a bit of both.
Other tools you can use to help pay down debt include 0% balance transfer cards, negotiating with creditors and using budgeting apps.
If you are struggling with debt though, there are places you can go to get help and advice.
We round up a list of places where you can get debt help for free, including various charities and government-backed schemes.
We explain how you can clear £670 of debt in a year with this easy money challenge – by starting with just 1p today.
Plus, here are some top tips for sorting your finances from a a debt adviser.
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