Instead of Snowmen This Winter, Try Building a Snowball Effect for Your Debt

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Even if you've taken advantage of competitive rates on bad- and no-credit car loan in St. Louis and you have the car you want, you may still be looking for ways to reduce the total amount of debt you're in, and keep boosting your credit score.

Using the "snowball effect" method on your loans and accounts could help you cut way down on debt, faster than you might think.

How do you "snowball" your loan payments? It's actually pretty easy.

Let's say you have 5 accounts on your credit report that you're still paying down. The smallest debt is only $200. All of your accounts have minimum monthly payments of $25, but you can afford to put $200 per month toward your bills. You can afford to make additional payments on your debt--and you should.

By making four minimum payments (for a total of $100) and one big over-payment of $100/month on your smallest loan, you can completely wipe out that debt in just two months.

 

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When the smallest account is clear, move on to the next-smallest---maybe a $500 debt. By adding that $100/mo to the existing $25/mo payment, you can now pay down $125/mo on that debt, and wipe it out in just four months.

When that second-smallest account is clear, move on up another level. A $1,000 debt. That will take a little longer to pay off, but you'll be able to "snowball" your additional payments to be able to put $150/mo down on that debt, and clear it in under a year.

Just continue the snowballing process, and watch your debt melt away.

 

Now, while all of these figures are figurative, it just goes to show how much good the snowball effect can do, and how quickly.

Start snowballing your debt today--and when you're done, you can start building up your savings account for your next car!

 

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Categories: Credit Tips