The reason I like the snowball debt reduction method over the typical debt consolidation loan is that it forces you to get to the root of the problem. With the root of the problem, of course, being too much debt, not too much interest.
Look, nobody wants to pay interest on their debts, especially the seemingly excessive interest fees charged by credit card companies. But the mistake that too many people who are in debt make is to focus on the interest as the problem, and not the underlying debt. They convince themselves that if they could just reduce the interest rates they are being charged that debt freedom will be just around the corner. This is rarely the case.
Conversely, the people who focus specifically on paying off the actual debt, and doing so in an orderly fashion, end up being the ones who are ultimately successful in digging themselves out of debt. Here's why these people are successful, and how they actually pay down their debts using the snowball debt reduction method.
Probably the main reason that the snowball method of debt relief works for the people who use it is because they understand one thing. They understand that no matter what debt relief method you choose, your chances of it being successful will increase dramatically if you do just one thing...
Actually, to be more specific, you need to create a detailed and itemized budget, that allows you to live within your means. Your personal or family budget will also help you identify areas of spending that you can cut back on, allowing you to divert as much money as you can each month to paying down your debts. Your budget will be the foundation of your debt relief plan, no matter what that plan is.
Once you have your budget laid out it is time to implement the snowball debt reduction plan. The first thing you need to do is list all of your debts, starting with the debt with the smallest balance and working your way down to the debt with the largest balance. Next, beside each debt write down the absolute minimum payment that you must make each month in order to keep that debt current, and your creditors happy. Finally, each month you are going to pay just the minimum payment amount on your debts, except for the debt at the top of the list. With this debt you pay as much as you can towards it each month until it is paid off.
Let's say that according to your budget, you have $1,100 per month allocated to "debt payments". And according to your list of debts, your minimum monthly debt payments total $900. Now, this $900 includes the $50 minimum payment due for your smallest debt (your smallest debt is $750). The first month you pay $850 towards all of your debts except the top one. This keeps them current. The top debt then receives what is left over. In this case it is $250 ($1,100 - $850 = $250). You continue this payment plan until the top debt is paid off, which will be in 3 months ($750 / $250 = 3 months). Once your top debt is paid off, you cross it off the list, do a little celebration dance, then refocus on the next debt on the list.
Now here is where the "snowball" portion of the snowball debt reduction plan starts to kick in. Let's say the minimum payment amount for the next debt on the list is $100. In month number four you will continue to pay this $100, plus the $250 that you were paying towards the first debt, for a total payment of $350. As the amount that you pay towards each debt increases the snowball starts to gain momentum and go faster and faster. The further you get down the list the faster the debts disappear.
The snowball debt reduction plan works. Period. And it works because it focuses on paying down debt, not reducing interest or payment amounts like a debt consolidation loan. So instead of being fixated by interest rates, try focusing on the real problem which is the underlying debt.
In a word, yes. But, only after you have proven to yourself that you can prepare a budget that has you spending less than you earn, and you have proven that you can stick to that budget. If you have done this, and already made some real progress paying down your debts with the snowball debt reduction method, then you could consider a debt loan to help you decrease your interest charges.