This is a repost of a series I did when this blog was on Blogger back in 2009.

Ready to see a debt snowball in action? Using my real debt numbers I’m going to show how a debt snowball works and how you can pay off your debt using the money that you are already paying to service your debt. Using this method, you’ll get out of debt months/years earlier than you’d ever thought you could.

Recapping my debt balances and the pay off if I were to follow the conventional plan:

Visa: $2,371.53, $50 per mo, 12%, 65 months, $3,250.00

H.F: $1,000.00, $19 per mo, 9.9%, 70 months, $1,333.00

Car: $3,571.69, $245 per mo, 7.9%, 16 months, $3,920.00

Capital One: $984.43, $19 per mo, 9.9%, 68 months, $1,292.00

BoA: $4,588.00, $51 per mo, 9.52%, 103 months, $5,253.00

Perkins: $2,027.15, $40 per mo, 5.00%, 58 months, $2,320.00

Direct SL: $5,786.44, $52.52 per mo, 4.22%, 140 months, $7,352.80

Mortgage: $48,175.00, $413.06 per mo, 6.25%, 181 months, $74,763.86

Remember we are using the same $889.58 I was already paying out.

Since the car loan has the shortest payoff term but the largest payment out of all the non mortgage debt, there won’t be any interest savings or reduction in payoff time. When the car was paid off in 16 months, the very next month as if I still had to make that payment, I took that $245 added it with the $50 I was sending to Visa until pay off, approx 7 months later. Visa’s payoff looked approximately like this:

- $1972 approx balance. Paying $295 per month instead of just 50 @ 12% interest, the total payoff time was reduced to 23 months, with a total amount paid of : $2,455. Note above the “normal” way of paying it, a payoff time of 65 months @ $3,250. That’s a $795 savings just by redirecting the car payment once it was paid off to this debt instead of using it to increase my lifestyle or incurring more debt. Let’s move on.

Now that I’ve paid off the car loan & Visa, the very next month I set my target on either Household Finance or Capital One since they have the same interest rate and balances. I decided to knock out of my wallet, Capital One. I took the car loan payment @ $245, the Visa payment @ $50 and added that to the Capital One payment of $19 for a total payment of $314. The TKO of Capital One looked approx like this:

- $733 approx balance. Paying $314 per mo@ 9.9 % interest, the total payoff time is reduced to 26 months from 68 months with the total amount paid: $1,142. That’s a savings of $150. Though that does not seem like much but that $150 will make a big difference going towards the larger debts. Let’s move on to the next one in line to be taken out, Household Finance.

OK, as it goes the very next month after I’ve sent the last payment to Capital One, I’ll take that $314 and add it to Household Finance’s payment of $19 for a total of $333. The numbers for Household Finance look like this:

- $725 approx balance. Now paying $333 per mo, 9.9 %, the total payoff time is reduced to 28 months from 70 months and the total amount paid: $1,173. Savings $160.

Moving right along to the next target, Bank of America. After paying off Household Finance, we are now sending BoA, that $333 + BoA’s $51 for a total payment of $384. Here’s where is starts to get juicy:

- $4175 approx balance, now paying $384 per mo, the total payoff time is reduced to 39 months from 103 months and the total amount paid: $5,668. Savings, $2441! I don’t know about y’all but I can think of a whole lot more fun things to do with $2441 than giving it to the bank.

Next victim is the Perkins loan. I’m now sending them $384 + their $40 payment for a total payment of $424. The numbers:

- $761 approx balance, now paying $424 per mo, the total payoff time is reduced to 41 months from 58 months and the total amount paid: $2,284. Savings, $36. Not much there but every penny counts as you will see with largest debt.

Next target, the Direct Student Loan. I’m sending them $424 + their payment of $52.52 for a total of $476.52. Let the whacking begin:

- $4436 approx balance, now paying $476.52, the total payoff time is reduced to 50 months from 140 months and the total amount paid: $6,609.78. Savings, $743.

Last but certainly not least, is the “death pledge” otherwise know as the mortgage. At this point, a ways down the road, I’ve paid of all other debt and will start sending the mortgage company $476.52 + the mortgage payment of $413.06 for a total monthly payment of $889.58. I know that it was a while ago but that number sounds familiar right? Hang in here with me.

- $38,836 approx balance, now paying $ 889.58, the total payoff time is reduced to 96 months from 181 months and the total amount paid: $62,854. Savings, $11,910.

Just by redirecting the money that’s already being paid out and not letting it be absorbed into your spending or worse incurring new debt, I can get out of debt in this case in 8 years instead of 15 years!! I’ve also saved or should be more aptly put, did not have to pay out $16,235!! That’s more than 1 years take home pay for my family at this point in time.

Being the type person that I am, I was compelled to see if I could reduce the time to less than 8 years. Also my 40th birthday was around the corner and I wanted debt free status as a birthday present. If I didn’t mention it before, I had turned 34 a couple of months before I bought my house. Come back and I’ll show you those numbers next.

###### Related articles

- Getting Outta Debt pt 6- Airing Dirty Laundry…Debt (ceraisis.net)
- Gettin’ Outta Debt pt 5-My Debt Numbers (ceraisis.net)
- Gettin’ Outta Debt pt 4-The Contingency aka Emergency Fund (ceraisis.net)
- Gettin’ Outta Debt pt3- The Debt Snowball (ceraisis.net)

Your info is great why not put this into an ebook?

Hurry! I can't wait until the next part. By the way, the only long term debt I have is two mortgages (two properties). But I would love to pay one of them off! You are serving up some great motivation.

Hurry! I can't wait until the next part. By the way, the only long term debt I have is two mortgages (two properties). But I would love to pay one of them off! You are serving up some great motivation.

We have the mortgage left, but have been stuck at this point since 06 when we got out of debt. We did the Dave Ramsey plan. I am torn b/t being college ready in a year for my oldest/retirement/mortgage. I know DR tried to make it simple, but it’s all jumbled up to me. Any advice?

Hi Chelski! I’m sorry that I got out of sorts and just now getting back to your comment. I have to warn you, I don’t follow mainstream advice too much anymore so it’s kinda hard to give you a short n quick answer. I’m working on a post which will probably be more than one that will talk about the issues you’ve addressed.

PS. we started on mortgage but moved-which threw the whole plan off with the housing market crashing and so did our savings to pay to get out of the house(job transfer). feels kind of futile to pay off the mortgage when our new home is already under water by 10k as we wait patiently to rebound.

The savings can be substantial when you pay off your mortgage early!!!!! I saved $20k in interest. (I sold the other property.)