Debt Reversal Pyramid - "Snowballing Payments"

The debt reversal pyramid is a method of paying off your debts faster than your current schedule. It can yield great results, but it only works if your payments are on time and you stop using the lines of credit that you are trying to repay. You must balance multiple payment schedules and it can be challenging. Make sure this is the right solution for you before you commit to it. Here is how it works:

  • Review your monthly expenses and reduce them where you can. Create a budget that sets aside an extra amount of money every month to use to pay off your debts.
  • List your debts (balances and payments) from smallest to largest. If your loan balances are all roughly the same, list them from highest interest rate to lowest interest rate. Pay off the loans with the highest interest rates first.
  • Start with the first loan on your list. Include the extra sum of money that you set aside in step one, with every monthly payment.
  • Once that loan is paid in full, focus your attention on the next loan on your list. Add the entire monthly payment from first loan: minimum payment plus extra amount to the monthly payment for the second loan.
  • Continue working through your list. With patience and consistency, you can pay off your debts.

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