Getting the debt snowball rolling

7. maj 2009

Two prevailing methods of getting the snowball rolling are found in the blogs.

Both demand that you list all your debts and find out what the minimum payment and interest rate is on each of them.
Method #1: Pay the minimum on each loan, and as much extra as possible on the loan with the highest intrest. Apply all extra cash towards the principal of that loan. 
Once it is paid off apply that minimum to the the minimum of the loan with the next highest intrest + any extra cash. Keep going until all loans are paid off.
Method #2: Start with the loan that has  the smallest principal. Then move to the loan with the next smallest principal, to sort of get the snowball rolling.
The latter is the method I prefer. It seems very motivating even realizing that I will be paying more intrest that I would have to. I also believe that I will combine the two methods along the way.
My challenge is that I have 8 loans to pay down. My wife and I dont have any credit card debt or car loans, so the loans are mortgages, debt from failed businesses, consumer debt and private loans (from friends and family).
Here is the run down:
Type Principal Minimum Interest
Mortgage I 286,667 1,251 4,7%
Mortgage II 178,333 781 4,8%
Mortgage III 159,667 711 4,8%
Bank loan I 101,000 489 6,0%
Bank loan II 64,333 542 8,0%
Bank loan III 58,333 0 9,6%
Private loan I 1,833 167 0,0%
Private loan II 33,333 0 0,0%
Monthly total payment   3,939  
The initial plan is to pay of the small private loan first. This is a friend loan and one that I dont particularly like. 
Once that one is paid off, we will then add the payment to the payment we are making on Bank loan II, to get this loan paid down.
We also plan to sell our home, which would fully pay down mortgages I and II as well as Bank loan III.
Check in later to follow my updates on the plan.

What are your thoughts about this topic?


3 Responses to “Getting the debt snowball rolling”

  1. Matt Jabs Says:

    Godspeed to you!Getting a plan in place is the only way to go. My plan has been so immensely helpful for my wife & I…we can hardly believe just how much we have benefited from laying it all out on paper.

  2. Hapi Says:

    hello… hapi blogging… have a nice day! just visiting here….

  3. tagskie Says:

    hi.. just dropping by here… have a nice day!

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