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Debt Elimination Plan Pros and Cons

Updated on June 13, 2011

Do you have a working debt elimination plan? If your plan is only paying the minimum on your credit card and loan debts, it’s likely to take many, many years before you see them paid off. And, that’s assuming you don’t add to the debt while you’re doing it.

I’m sure by now you’ve heard of financial gurus Dave Ramsey, Suze Orman and David Bach, who each have their own method of paying down debt as quickly as possible. They all work on the premise of using a snowball to reduce debt, but their processes differ slightly.

Dave Ramsey’s Balance Snowball

Debt are paid off in order by ascending balance, so the smallest debt is paid of first, and biggest is paid off last. To start, minimum payments are made on all the debts, but the smallest one must have a ‘starter’ of extra money to get the snowball rolling. As debts are paid off, the payments amounts are transferred so that the last debt will have a whopping payment amount to get it paid off quickly.

Pros: This debt elimination plan is psychologically satisfying – smaller debts get paid off faster and this can be a real incentive to sticking with it.

Cons: You will pay slightly more interest.

Suze Orman’s Interest Rate Snowball

Suze’s plan arranges debts by descending interest rate (highest to lowest), but first she adds $10 to the minimum payment of each debt. The starter money is added to the first debt on the list and then snowballs from there until everything is paid off.

Pros: You will most likely pay less interest than Dave Ramsey’s method.

Cons: You may wait quite awhile to see that first debt paid off, and this method only works if you have plenty of extra cash to cover the additional $10 a month per debt.

David Bach’s DOLP Snowball

David’s DOLP (done on last payment) debt elimination plan disregards balance and interest and debts are ordered by how many months are left to pay – from lowest to highest. To find the number of months left for each debt, divide the balance by the minimum payment. The starter cash and snowball is applied then on.

Pros: Like Dave Ramsey’s plan, you’ll see debts knocked out fairly quickly.

Cons: You’re likely to pay the most interest on this plan unless you can negotiate a lower rate with your creditors.

Any of these plans will get you where you want to be and that is debt-free. Just pick the one that appeals to you and get started!


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    • bloggering profile image

      bloggering 6 years ago from Southern California

      Really - any of these methods will work just fine!

    • gourownway profile image

      gourownway 6 years ago from Los Angeles

      I'm a big fan of the snowball way of paying debts down. I have always followed the Dave Ramsey, but might look into the Orman way. I have never heard her view on it before. Thanks!

    • bloggering profile image

      bloggering 7 years ago from Southern California

      You bet I will!

    • LibertyLiterature profile image

      LibertyLiterature 7 years ago from Brisbane, Australia

      Cool stuff. Keep it coming!