How This Blogger Used the Debt Snowball Method to Pay Off $36,000

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If you’re struggling to pay off debt, it can be difficult to know where to start. Do you tackle that credit card bill, or should you throw more money at your student loans?

Jennifer Bailey, a lifestyle blogger and creator of The Red Dress, confronted this challenge after realizing she owed $25,000 in student loans and $11,000 in credit card debt.

She found that the debt snowball method, an approach to debt repayment that celebrates small wins, was the most effective approach for her and her family. Here’s how she applied this method to sweep away $36,000 in debt.

Confronting a pile of debt

Jennifer first took on debt to attend Lee University, where she studied education and went on to work as a teacher.

“Immediately after graduation, I got a teaching position and, of course, began working to pay off my debt,” says Jennifer. “However, I went on to get my master’s and specialist degrees, so the debt kept piling up.”

In addition to $5,000 in undergraduate loans, Jennifer took out $20,000 to fund her master’s degree. Plus, she started overspending on her credit cards, not realizing how big her balance was getting.

“Although I had a ‘budget,’ I never truly stuck to it,” says Jennifer. “I shopped often and bought what I wanted when I wanted. Since we didn’t have kids at the time, we also ate out a lot and took several big trips.”

Jennifer’s financial wake-up call came when she realized she had accumulated $11,000 in credit card debt. She knew she needed to make drastic changes and come up with a plan, especially if she wanted to achieve her other goals in life.

“We have big goals of owning a vacation home, sending our daughters to the college of their choice, and traveling with our family,” says Jennifer. To ensure they could meet those goals, Jennifer and her husband looked for a way to hit their debt hard.

She dug her way out with the debt snowball method

Jennifer learned about the debt snowball method from Dave Ramsey, of whom she’s been a long-time fan. “I have used his budgeting tool since college, but never took his snowball method seriously until we realized we needed to take drastic steps before having children,” she explains.

So how does the debt snowball strategy work? Let’s defer to the expert himself.

“List all your debts, except for your home, from smallest to largest,” says Dave Ramsey. “Make minimum payments on everything but the smallest debt, and attack that smallest debt with a vengeance.”

The debt snowball has you tackle your smallest balance before moving on to the next. You’ll still make the required minimum payments on all your debts, but you’ll work on closing out the ones with the smallest balances as fast as possible.

For example, let’s say you have credit cards with revolving balances of $1,000 and $7,000, and student loans with balances of $5,000 and $10,000.

With the debt snowball method, you’d first tackle your $1,000 credit card debt. Once that’s paid off, move on to the $5,000 student loan. Once you finished paying that loan off, you’d work on paying off the next biggest, and so on.

Quick wins offer serious motivation

According to Ramsey, closing out even a small loan balance will push you to keep going. “It lights your fire,” Ramsey says. “Quick wins get you motivated to keep going.”

However, the debt snowball method does have one potential drawback: It won’t necessarily save you the most on interest.

If saving money on interest is your priority, consider the debt avalanche method instead. The avalanche strategy requires you to pay off the debt with the highest interest rate first, rather than prioritizing the smallest balances.

The debt avalanche method saves money on interest, but it could take longer before you completely close an account. That’s why Ramsey prefers the debt snowball strategy, claiming it gives you more of a psychological boost. “Other methods work mathematically, but if we were doing math, you wouldn’t have debt,” says Ramsey.

Jennifer certainly felt this boost as she paid off her smallest loans first. “Bills disappear one by one, and somewhat fast since you start with the smallest bill,” says Jennifer. “With the snowball method, you have a greater sense of success as you pay off bills.”

Because she saw her bills disappearing, Jennifer knew her efforts were working — and she was motivated to keep going.

Downsizing her lifestyle helped her pay off debt fast

After coming up with a financial plan of attack, Jennifer considered what else she could do to pay her debt off quickly. She decided to reduce her expenses so she could put more of her income toward her loans.

And Jennifer didn’t start small. She looked at a significant expense she and her husband shared — their home — and decided to downsize.

“The market was a seller’s market at that time, so we knew it was the perfect time to act and make a dent in our debt and savings,” says Jennifer. “Moving from our larger home was very tough, especially for me, because it was our first house together.”

Although the transition wasn’t easy, Jennifer was committed to spending less. “We changed utilities to find lower rates,” she says. “[We] cut out cable, got rid of Netflix, canceled magazine subscriptions, cut back on expensive date nights, found cheaper gym memberships, and did without pedicures for a while.”

Letting go of these habits was difficult, but effective. “After just the first month of fully budgeting and cutting back … the results were amazing,” says Jennifer. “We both felt encouraged to continue pursuing financial freedom.”

Through minimizing their lifestyle, Jennifer and her husband moved closer to a debt-free life.

Jennifer learned major financial lessons along the way

Once Jennifer and her husband decided to change their habits, it took them just 11 months to pay off $36,000 in debt. Now that Jennifer is debt-free, she intends to keep it that way.

“We have learned a lot about priorities and what we truly need in life,” says Jennifer. “This is reflected in the amount of money we now have decided to give, save, and spend each month.”

For instance, they donate to their church every month, along with nonprofit organizations that help children and families in need. “We now are able to make the decisions for ourselves and our family that support time together and time serving others,” says Jennifer.

She and her husband also avoid credit cards so they’re not tempted to overspend. “We no longer use credit cards, but only cash and debit, and every penny is accounted for every month.”

Now that Jennifer reclaimed control of her financial destiny, she doesn’t regret the sacrifices she made along the way. “The work to pay off debt is a tough road, but in the end, it is so worth it.”

Come up with a plan of attack for your debt

If you’ve got debt looming over your head, you know how overwhelming it can feel. It might even be tempting to ignore it altogether. But pretending your debt doesn’t exist will only make the situation worse.

Devising a plan will help you regain control over your finances. Because the debt snowball method shows your progress, it can propel you toward your goals.

“Every time the snowball rolls over, it picks up more snow,” says Ramsey. “Once you get a few quick wins under your belt, you’ve got momentum!”

You can use this momentum to race to the finish line of debt payoff. Consider downsizing your lifestyle like Jennifer did to get there even faster — or check out these tips for paying your student loans off ahead of schedule.

Interested in refinancing student loans?

Here are the top 8 lenders of 2020!
LenderVariable APREligible Degrees 
Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 2.94% APR (with Auto Pay) to 5.98% APR (with Auto Pay). Variable rate loan rates range from 1.89% APR (with Auto Pay) to 5.98% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of February 4, 2020, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 2/24/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on our student loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 3.20% APR to 6.48% APR (with AutoPay). Variable rates from 2.31% APR to 6.48% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.31% APR assumes current 1 month LIBOR rate of 1.81% plus 0.75% margin minus 0.25% for AutoPay. If approved for a loan, the fixed or variable interest rate offered will depend on your credit history and the term of the loan and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

3 Important Disclosures for Figure.

Figure Disclosures

Figure’s Student Refinance Loan is a private loan. If you refinance federal loans, you forfeit certain flexible repayment options associated with those loans. If you expect to incur financial hardship that would impact your ability to repay, you should consider federal consolidation alternatives.


4 Important Disclosures for Laurel Road.

Laurel Road Disclosures

Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

ANNUAL PERCENTAGE RATE (“APR”)
This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.

FEE INFORMATION

There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account.

LOAN AMOUNT

For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans.
For eligible Associates degrees in the healthcare field (see Eligibility & Eligible Loans section below), Lender will refinance up to $50,000 in loans for non-ParentPlus refinance loans. Note, parents who are refinancing loans taken out on behalf of a child who has obtained an associates degrees in an eligible healthcare field are not subject to the $50,000 loan maximum, refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for more information about refinancing ParentPlus loans.

ELIGIBILITY & ELIGIBLE LOANS

Borrower, and Co-signer if applicable, must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements).

Graduates may refinance any unsubsidized or subsidized Federal or private student loan that was used exclusively for qualified higher education expenses (as defined in 26 USC Section 221) at an accredited U.S. undergraduate or graduate school. Any federal loans refinanced with Lender are private loans and do not have the same repayment options that federal loan program offers such as Income Based Repayment or Income Contingent Repayment.

All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions.

For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned.

INTEREST RATES

The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency.

DISBURSEMENT OPTIONS

The repayment of any refinanced student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired.

POSTPONING OR REDUCING PAYMENTS

After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship.

We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends.

We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment.

If Lender agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Lender has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments.

KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

This information is current as of February 25, 2020 and is subject to change.


5 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers.


6 Important Disclosures for College Ave.

College Ave Disclosures

College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

1College Ave Refi Education loans are not currently available to residents of Maine.

2All rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.

3$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.

4This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 1/1/2020. Variable interest rates may increase after consummation.


7 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 1.68% effective January 10, 2020.


8 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it  endorse,  any educational institution.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 12/019/2019 student loan refinancing rates range from 1.90% to 8.59% Variable APR with AutoPay and 3.49% to 7.75% Fixed APR with AutoPay.

1.89% – 5.98%1Undergrad
& Graduate

Visit Earnest

2.31% – 6.48%2Undergrad
& Graduate

Visit SoFi

1.93% – 6.68%3Undergrad
& Graduate

Visit Figure

2.29% – 6.65%4Undergrad
& Graduate

Visit Laurel Road

1.99% – 7.06%5Undergrad
& Graduate

Visit Splash

2.62% – 6.12%6Undergrad
& Graduate

Visit College Ave

1.77% – 6.25%7Undergrad
& Graduate

Visit CommonBond

1.90% – 8.59%8Undergrad
& Graduate

Visit Lendkey

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.