Debt Roll Down

Divide, Focus, Conquer

The debt roll down method of achieving debt freedom is probably the most popular method of debt reduction taught by financial experts. And if you've never heard of it, it may be because this method goes by other names such as debt snowball and debt roll up.

But no matter what you call it, the premise is always the same.

First, you list all of you debts on a piece of paper, or spreadsheet. Beside each debt you write down the current balance, the interest rate, and the minimum monthly payment due each month to keep the debt current.

Let's say that you have 7 debts, including things like your mortgage, car loan, student loan, several credit cards, and a signature loan. Let's also assume that if you added up all of the minimum payments on these debts, the total would come to $2,000. Now here is the only "qualification" that you need to have in order to make this system work for you. You must be able to pay more than $2,000 per month (the sum of the minimum payments) towards you debts.

Sidebar: If you can only pay the minimums on all your debts each month, or if you are struggling to just do that, unfortunately the debt roll down program will not work for you. A better program would likely be a debt management plan administered by a qualified credit counselor.

Now, if you have, say, $2,300 per month available to pay down your debts, you are in business.

Getting Started With The Debt Roll Down Method

The next step in the debt roll down process is to pick one of your debts to focus on first. The object is to get this "first" debt paid off as quickly as possible, and then "roll" the amount that you were paying on that debt into paying the "next" debt on the list.

But here is where there is much debate. There are as many different methods as opinions when it comes to exactly how you should order your debts and prioritize them for pay-off. Here are some of your choices:

  • list your debts from highest to lowest in terms of interest rates
  • list your debts from lowest to highest in terms of outstanding balance
  • list your debts from shortest to longest in terms of "payoff dates" if you were to continue to make payments equal to the current minimum balance
  • list your debts from smallest to largest in terms of minimum payments as a percentage of the outstanding balance.

I am sure there are other ways, but these are the most common.

Let's go back to our example for a moment. No matter which method you use to order you debts, the idea is that you would only make the minimum payments on all of your debts each month, except the debt at the top of the list. For this debt you would pay the minimum plus the extra $300 that you have. And you would continue to do this until the top debt is gone.

The next step is where the "debt roll down" method gets its name. After the first debt (the debt at the top of the list) is paid off, you would then "roll down" the $300 and the minimum payment amount from debt #1, into the payments for debt #2. And each time the top debt is paid off, you "roll down" the payment amounts to the next debt on the list. As you continue this process, the amount you put towards each debt on the list gets bigger and bigger. This is why this method is also called the "debt snowball".

Which Method Of Ordering Debts Works Best With The Debt Roll Down Plan?

Personally, I would advise you to choose one of the first two methods. In other words, either order the debts in terms of interest rates or in terms of outstanding balances. From a purely mathematical standpoint, the interest rate method will get you out of debt faster while paying less interest charges. However, when using the outstanding balance method, you will experience the emotional success of paying off the first debts on your list more quickly, thus increasing your chances of sticking with the plan and seeing it through to debt freedom. And of course, completing the debt roll down plan is the ultimate goal.


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