Disclaimers

Debt rollover is a simple and efficient way to pay off your debts. Consider the following situation that shows how the debt rollover plan works:

Imagine you have two credit cards, a student loan and a car loan. The first step in the debt rollover plan is to list your debts from the debt with the lowest balance to the debt with the highest balance. Let's say the order goes as follows: credit card A, credit card B, student loan and car loan-this is also the order you should pay off your debts. It is important to start with the debt with the lowest balance so the debt rollover can start as soon as possible.

Make the minimum monthly payments on all of your debts but on credit card A try and increase your payment in order to pay the card off quickly. This will get the debt rollover started and, one at a time, you can apply more money to your other debts.

Once credit card A is paid off, take the amount of money that was assigned to pay off credit card A and add it to the minimum payment of credit card B. As soon as credit card B is paid for, take the amount of money that you were paying on credit cards A and B and add it to the minimum payment of the student loan. This loan should deplete quickly and once it is paid off, the rollover will repeat until the car loan is paid in full.

Once you have a copy of your personalized Debt Elimination plan, the only numbers that are important are the ones in the "Payment" column. Pay your loans each month as directed by this column. Through spending your money wisely utilizing the debt rollover plan and personal financing, you can save thousands of dollars in interest and avoid the debt plague.

Second example using real numbers
Ignoring interest rates, let's pretend you have the following debt (along with the minimum payments):

- Car Payment - $2500 balance - $150/month minimum
- Credit Card A - $250 balance - $25/month minimum
- Loan - $5000 balance - $200/month minimum
- Credit Card B - $500 balance - $26/month minimum

Your minimum payments for all debt would be $401 per month.
In this example you would prioritize your debts in the following
order (lowest to highest):

- Credit Card A - $250 balance - $25/month minimum
- Credit Card B - $500 balance - $26/month minimum
- Car Payment - $2500 balance - $150/month minimum
- Loan - $5000 balance - $200/month minimum

Now, assuming (although not required) you had $100 extra per month to send in, you would apply that $100 to the Credit Card A so that the payment for it would be $125 per month and the other debt would receive the minimums.

After Credit Card A is paid off (in two months), you would apply the extra $100 to Credit Card B PLUS the $25 you were sending in to Credit Card A. So now your payment to Credit Card B would be: $26 normal minimum + $25 that you normally sent in to Credit Card A + $100 that you are able to send extra.

Your payment to Credit Card B would be $151 instead of $26. Therefore, you would pay it off much faster. Then, when Credit Card B is paid off, you would now send in the following to the Car Payment: $150 normal minimum + $25 that you normally sent in to Credit Card A + $26 that you normally sent in to Credit Card B + $100 that you are able to send extra. Your payment to Car Payment would now be $301 instead of $150.

If you didn't have $100 extra (or any extra amount) the debt snowball method would be the same minus $100 per month.