The Big Payoff Loan
A creative way to repay credit card debt is using a debt snowball plan. In a debt snow plan, a borrower puts all excess funds towards their smallest balance debt until it is fully repaid, while making minimum payments on other balances. After the smallest balance is repaid, the full amount that was being paid towards that balance is then paid towards the next lowest balance, in addition to the current minimum payment. This cycle is repeated until all debt is repaid. In theory, the debt snowball concept works because the consumer quickly reduces the number of accounts outstanding and feels as though progress is being made. This is why current interest rates are not a consideration.
Using the debt snowball concept, THE BIG PAYOFF LOAN was designed for consumers who have a desire to reduce their unsecured debt, but lack the financial discipline or know-how to do so. In the program, the borrower transfers a percentage of their unsecured debt to a 12-18 month personal loan at a low fixed interest rate. If the borrower succeeds at paying down this portion of the debt, the credit union would then advance additional funds to pay down another portion of their debt (up to the original amount approved). This cycle repeats itself until all debt is repaid. If during the course of the program the borrower fails to pay as agreed or fails to reduce their overall unsecured debt, the borrower would not be eligible for future advances.
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