Debt Consolidation vs. Snowball Debt Repayment

Jeanne McTaggartDebt Consolidation

The Feeling of Financial Freedom

Personal finance gurus have a variety of different quick fix plans and ideas that are supposed to help people get out of debt. Some people try the snowball method before realizing they could have saved time and money with debt consolidation. Naturally, there is nothing morally wrong with the snowball method, which entails paying off the credit card with the lowest balance first so you a feeling of accomplishment.

However, most people want the feeling of freedom that comes with being completely out of debt as soon as possible. Without lowering interest rates and eliminating late fees or other charges, it’s difficult to make as much progress with the snowball method.

How the snowball method works

After you pay off your lowest balance credit card with the snowball method, you move onto the next credit card which has a larger balance than the first one but not as high of a balance as other credit cards you still owe. The idea is to continue making the minimum payments on all your other debts except the one with the lowest balance or total amount due. As you move along, you roll over or snowball the extra money into the next bill you are focused on eliminating. The downside is your high interest rate credit cards are quickly growing since you are only paying the minimum on them.

How Debt Consolidation works

With debt consolidation, you get the benefit of having a non-profit credit counseling agency working on your behalf to negotiate with creditors. Your creditors will approve a Debt Management Plan that calls for action on your part. You make a monthly payment to an accredited agency such as Christian Credit Counselors. They make sure all of your creditors receive their share of the monthly payment for as long as it takes to pay off the debt in full. In many cases, people get out of debt 80 percent faster. In addition, the trained credit counselors can discuss other helpful matters such as how to set a budget, make financial goals, work toward home ownership and build up your credit score.

The main argument used for the debt snowball method is that it’s motivating and easy. According to an article by Nerd Wallet, most people have more complicated financial problems that can’t be solved by the debt snowball method. Statistics by the Federal Reserve show the average household in America owes $15,185 in credit card debt. The snowball method costs people more in interest, while debt counseling can take care of the total picture.

At Christian Credit Counselors, we provide credit counseling and an opportunity for debt consolidation. We help you make progression on your principle balance so you can quickly and methodically pay off all your debt.

Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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