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Tata Capital > Blog > Personal Use Loan > How To Repay Debts Using The Snowball Method

Personal Use Loan

How To Repay Debts Using The Snowball Method

How To Repay Debts Using The Snowball Method

Any debt, whether small or huge, is typically difficult to manage because it can hamper one’s financial stability. The snowball method is a borrower’s best bet when grappling with outstanding balances. The debt snowball strategy can help break the debt bondage. It aims at eliminating debt one by one by starting with the small debts and moving to the next smallest debt. This article outlines a step-by-step approach to the snowball method.

Using the debt snowball method: A step-by-step guide

The debt snowball method aims at gaining momentum in debt repayment just like snowballs gain speed while rolling on the ground. The Snowball method or paying debt targets the smallest debt first, even if its interest is lower than others.  It focuses on paying off debts one at a time and freeing up the funds for dealing with the next smallest debt in line. Before implementing this strategy, one must have emergency savings to deal with any unexpected expenditures that may crop up along the way. Emergency funds should be equal to 3–6 months of one’s living expenses. The steps to implement this strategy are as follows:

1. Listing outstanding debts

First, borrowers must ensure they have sufficient funds to carry out the minimum monthly payment of their outstanding debts. The next step is to prepare a list of all outstanding debts that one has to repay, arranged from the smallest to largest ones. The interest rate of each debt must not be considered while preparing this list.

2. Paying the minimum on all other debts except the smallest one

After listing all debts, borrowers must repay a minimum amount on all outstanding debts. They must also track their expenditures to ensure they can meet their commitments of the minimum monthly amounts on debt. Preparing and following a budget plan is a good idea to control expenses; this way, borrowers typically have surplus funds to repay their debts.

3. Paying as much as possible on the smallest debts

Borrowers must determine the amount of money they can afford to pay besides the minimum amounts on their smallest debts. They must reserve some funds for emergencies and utilize the surplus to carry out additional payments on their smallest debts. Repaying a higher amount than the minimum required for one’s smallest debt is a small step toward a debt-free future. If borrowers lack surplus, they can try generating additional amounts by controlling their expenses or engaging in side hustles.

4. Repeating the process until debt-free

Repaying debts progressively frees up one’s funds and enhances one’s ability to repay other outstanding debts. Steps 1, 2, and 3 must be repeated every month until the borrower is finally debt-free. Paying off one debt can motivate borrowers to repay the others subsequently. Interest rates should not deter one while moving from the smallest debt to the next smallest one and so on. This process requires commitment and change in behaviour patterns but is a rewarding process.


Key takeaways

After reading the above article, you will understand how to repay your debts using the snowball method. The debt snowball method of paying debt can help one attain a debt-free future through a systematic process. One must remember to stay focused and aim at generating a surplus; this strategy can help enhance one’s ability to repay debt. Just like snowballs gain momentum, borrowers can also speed up their ability to repay debts by dealing with one debt at a time. In case you are in short of funds, avail quick finances with Tata Capital Personal Loan.

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