Debt Roll Down Strategy

A debt roll down strategy is a method for paying off all of your outstanding debts much more quickly than you would by paying just the minimum amounts. Using this strategy, you can quickly pay off one bill and add the monthly payment from it to the next bill as extra. By rolling payments down the list as each debt is paid off, you're creating what the financial author Dave Ramsey refers to as a "debt snowball" that picks up speed as it goes.

List All Debts

Make a list of all debts you currently have outstanding. Regular bills such as the rent and electricity are not debt, but credit card payments, outstanding student loans, a house mortgage, revolving store credit accounts and similar charge accounts are all forms of debt that need to be added to your list. Write down the name of your creditor or debt account, the total amount of the outstanding balance, the minimum monthly payment and the interest rate for each item on the list.

Organize Your List

Rearrange your list of outstanding debt either from the lowest to highest balance, or the highest to lowest interest rate. The debt roll down strategy works in two similar but distinct ways: Paying the smallest bills first or paying off the highest interest rate bills first.

Balance Payoff Approach

By listing your debts in order from the smallest remaining balance to the largest, you can start paying off one or more debts quickly. If your smallest outstanding debt is a doctor's bill of $100 for example, and your largest bill is the mortgage with a $100,000 balance, the doctor's bill can be paid off much more quickly than the mortgage. Paying off multiple small debts quickly is a good way to keep yourself motivated to stick with the plan.

Interest Rate Approach

Listing each debt from the highest interest rate to the smallest is a strategy that can help you save money over time, because your debt roll down strategy focuses on paying off the item with the highest interest rate first. Once the highest interest rate debt is paid, you then move to the next highest, thereby saving yourself from having those debts increase dramatically over time.

Rolling the Payments

Rolling down, or stacking, the debt payments is the heart of this system, regardless of whether you choose to pay off the smallest debts first or the highest interest rates first. Pay the minimum amount on each outstanding debt as you normally do, and add anything extra that you can possibly squeeze towards the first debt on your list. Even a few dollars extra added to the minimum payment will help you pay that first debt off more quickly. Once the first debt is paid, you then roll the monthly payment from that paid off debt to the second debt on your list. Add the payment from the paid off debt to the second payment as extra on top of the minimum, and that second debt is also paid off more quickly than it would have been with just the minimum. Once the second debt is paid, add the first debt's payment and the second debt's payment to the third debt's minimum payment. Continue rolling the payments to the next debt on your list as a new one is paid in full.