Debt Roll-up, also known as the Debt Snowball method, is the paying down of accounts one at a time by interest rate or balance. To use this method, you need to be able to pay 20% above your total monthly minimum payments CONSISTENTLY. This process will usually take four to five years.
The first thing you will do is create a spreadsheet or simple paper graph of all your debts and rank each of them by either interest rate or balance. You will begin to pay the extra 20% towards the highest interest rate or lowest balance account until it is paid off and then move on to the next account. You will continue in this manner until all accounts are paid off.
Since creditors can change interest rates, we recommend paying them off by balance, starting with the smallest and moving your way up. Hopefully you have a couple small balance accounts that you can pay off quickly, which will give you a much needed mental and emotional boost.
Who should consider debt roll-up? People who can pay 20% above their minimum payments on a consistent monthly basis. This method if also best suited for people with modest debt amounts (under $20,000). This method can also be combined with debt settlement as a hybrid.
