Snowball'ing Credit cards

readyletsgo

Hi all, i'm in a sticky situation (as usual) with my 4(! my own fault i know) credit cards, as in, they are all maxed out. I was doing some research on help clearing all of them and found this idea called Snowballing.
I'm just wondering if anyone else found this a good idea and used it?
Thinkin i will do this starting friday.

I have balances from 500 up to 2500, one of which is halifax which will be turned into a loan i guess in june (i do meet min payments on the halifax each month), but the same would apply to that too with this.
Here is the link Debt-snowball method

Also hope this will help someone who is in same situation as me and doesnt know what to do.

If its common knowledge please lock and kick me :P

RLG

**Timbuk2**

In theory, it might be an ok idea, but I don't think it's logical. Paying the smallest amounts first isn't that wise, considering that interest will be accruing on all the higher amounts as you are concentrating on the small debts.

Perhaps try and pay them off in order of interest rate, starting at the highest. This might have the effect of 'moving the snowball' faster, if you know what I mean.

readyletsgo

you see, in my mind when i do it out it seems like a great way, pay the smallest first and meet min payments on others. Then the same with the next smallest and so on.
But maybe paying the highest rate first then moving to the next one down would be better.

I'll put it all down on paper tonight for myself and see how it works out.
It will be a tight 2 years ahead but anything to get them cleared and closed as fast a possible.

jmbkay

Let us know how you go.

readyletsgo

Will do.


I also read on that wiki page that it is more of a psychological thing as in you see you credit cards/loans close faster if you clear the smallest first and can give you a little faith to keep going as they clear and close.

I think thats what is attracting me to the idea, the fact you have a plan that has an end, if stuck by.

Ps: all my cards are cut up and not in use anymore thank god.

chris85

To be blantantly honest pay the most off the highest balance and try get that out of the ways first. Ensure minimum payments are met on all cards at least to ensure no late charges.

Other option, become a credit union member and save a small amount with them and maybe six months down the line you may be able to get a loan to clear all credit cards. This would be a lot lower on the interest.

3DataModem

chris85 wrote: »

To be blantantly honest pay the most off the highest balance and try get that out of the ways first.

this makes no sense at all...

thelongfellow

Laser card-no money in your account=no purchase. Simple really.

4 credit cards... You really need to start living within your means.

Options? Credit union one is the best. You need to save regularly (standing order when your wages come in) for 3/6 months. Keep paying off as much as you can on the cards with the highest rates-meet min payments on others. When you can get a CU loan pay off all the cards and get rid of them. Interest in the CU is far lower esp. if you say it's a car/holiday loan.

chris85

3DataModem wrote: »

this makes no sense at all...

sorry meant highest interest. apologies

readyletsgo

thelongfellow wrote: »

Laser card-no money in your account=no purchase. Simple really.

4 credit cards... You really need to start living within your means.

Options? Credit union one is the best. You need to save regularly (standing order when your wages come in) for 3/6 months. Keep paying off as much as you can on the cards with the highest rates-meet min payments on others. When you can get a CU loan pay off all the cards and get rid of them. Interest in the CU is far lower esp. if you say it's a car/holiday loan.

Yup have that set in the past month for €20 a week to come out of my wage to my cu account then look at maybe getting a loan to clear the remaining debt on cc's.
I'm not in dire strates or anything, just wanna get them cleared and closed.
Its just an idea i thought might interest people on here and see what everyone thinks.

makes complete sense in my mind anyway;)

pog it

How does this sound?

Clear off the card with the smallest balance first- as in make the biggest payments to this card. That way you see results for your sacrifices to get there.

With the other 3 cards, do it like they said above, work from highest interest rate down.

John Mason

i have done this about 10 years ago and i didnt even know it had a name:)

it really is a mind over matter thing.

i had my various debts listed on a notice board in the kitchen.

i aimed to clear the smaller one first because you go from owing people 6 to 5 etc.

every week when i paid off money i would reduce the amount owed on the notice board, so i could see a progress.

it might not be the most sensible idea but it is really motivating.

anything that helps you become debt free isnt a bad thing

djk1000

Paying off the higher interest makes sense, moving the cards to a bank or credit union loan makes more sense. Don't forget the government duty on the credit cards, you'll save that too with a loan.

readyletsgo

irishbird wrote: »

i have done this about 10 years ago and i didnt even know it had a name:)

it really is a mind over matter thing.

i had my various debts listed on a notice board in the kitchen.

i aimed to clear the smaller one first because you go from owing people 6 to 5 etc.

every week when i paid off money i would reduce the amount owed on the notice board, so i could see a progress.

it might not be the most sensible idea but it is really motivating.

anything that helps you become debt free isnt a bad thing

Thank you Irishbird!!!!

Yeah its just the thought of one card/loan disappearing fast then moving onto the next. I had that thought of having board up showing the amounts owed on each and reducing them each week, thanks for that!


Pog it, i like your idea, clear the smallest amount first to get the motivation going then move onto the highest rate card next to clear! That could work for me too, thanks!


By the by i dont have a mortgage, just rent and bills so not going to get myself in a bad state with this.

defiantshrimp

It's a very unwise idea, you should target the loans with the highest rates of interest first. You are essentially giving money away to the bank by deciding to pay off debt with a lower rate of interest first.

If you want/feel the need, you can make a notice board with the total amount of debt outstanding. That will let you know the progress you are making.

Highly Salami

In all fairness, smaller debts usually have higher interest rates than larger loans anyway, credit cards > personal loans > mortgage/remortgages.

chris85

Highly Salami wrote: »

In all fairness, smaller debts usually have higher interest rates than larger loans anyway, credit cards > personal loans > mortgage/remortgages.

these are all credit cards though

broker2008

1. Make sure all minimum payments are made each month for each card.
2. The card with the highest interest rates have the most money paid off to reduce the overall balance.
3. Reduce your outgoings as much as you can. Write down EVERY item that you spend money on to see where savings can be made. Don't go to the pub, eat out, holidays, smoke etc.
4. Look at outgoings of mobile phone, coffees, lunches, house phone, gym, sky, clothes, bottled water - reduce or get rid off.
5. Switch electricity provider, gas provider, health insurance, waste disposal provider and phone/internet providers.
6. Get another job if you can.

If credit union and/or bank loans are available with lower interest rates, take them. Good luck.

readyletsgo

ok so the rates for the 4 cards are.

€500 balance rate of 9.5%
the other larger 3 are at rate of 14.9% which is high.

So will clear €500 balance first then move onto the highest balance i have next and work back and meet min payments each month also.

Feel good about this today.

Thanks for all your advice everyone! Been a great help!
I'll keep you posted on my progress.

Anyone else doing this at the moment with there loans/cc's?

AFOB

Hi Readyletsgo,

Will the debt on the halifax card automatically be turned into a load or do you need to arrange with them, and if so what are the terms of the loan ?

readyletsgo

AFOB wrote: »

Hi Readyletsgo,

Will the debt on the halifax card automatically be turned into a load or do you need to arrange with them, and if so what are the terms of the loan ?

Going to give them a call next week about the loan arrangments but as far as i can tell from the website info, the cc balance will be turned into a loan from the 18th june provided i have been meeting min payments each month which i have been doing.

They have an example, up on the website, with a balance of €2500 with a payment of €75 per month with no penalties for clearing more than min each month.
My balance with halifax is €1500 so my min payment would be around €40'ish pm.

So hope all that works out.

At the end of this year i will be looking into getting a credit union loan to clear what is left on cc's.

EDIT: Just onto halifax and asked what happens to balance, lady adviced i dont have to do anything except keep paying min payments up to 18th june and on that day cc will be turned into a loan and a letter will issue to me stating this.

From the website:
'This repayment arrangement will enable you to clear your balance by paying a set amount each month. This new fixed monthly payment will be recalculated and fixed at 3% of the outstanding balance as at the 18th June 2010. From this date, the interest rate on the balance will be reduced to a variable rate of 10% APR from a typical APR of 13.4%'

AFOB

Nice one, ta for that, I have a halifax card too, so i'll just wait and let it transfer to the loan so....