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Aug 17, 2023

What Is the Debt Snowball Method?

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Dealing with debt can be overwhelming, especially if you carry multiple balances on credit cards and loans. The debt snowball strategy, a powerful debt-repayment method, offers a clear path toward financial freedom. 

What is the debt snowball method?

With the debt snowball method, you start by paying off your smallest debt and gradually work your way up to larger ones. By focusing on the smallest debts first, you experience a series of quick wins. As you eliminate each small debt, you gain a sense of accomplishment and momentum, which fuels your determination to conquer larger debts. While factors like interest rates and payback timelines affect the overall interest you’ll pay, the debt snowball method’s emotional boost can be invaluable.

The burden of debt can cause stress, tighten your budget, and hinder your ability to save for the future. However, if you’re grappling with numerous loans and looking for a path to become debt-free, the debt snowball method could be your ideal strategy. It provides not just a blueprint for debt repayment, but a journey that transforms your financial outlook, making the goal of a debt-free life tangible and achievable.

In this article, we’ll cover:

How the debt snowball strategy works

When employing the debt snowball method, you factor in all your debts, including credit cards, auto loans, personal loans, medical debt, student loans, and mortgages. Here’s how it works:

  1. Begin with a budget: Create a budget that reflects your monthly income and expenses, including minimum payments on your debts, and look for ways to save money so you can put more toward debt repayment. You might want to try the 50/30/20 budget rule as a starting point 
  2. Organize your debts: List your outstanding balances from the smallest to the largest debt. This is the order in which you’ll tackle paying off your debts.
  3. Pay off your smallest debt first: Make the minimum payment on all your debts each month, and allocate as much money as possible to making more than the minimum payment on your smallest debt.
  4. Pay off one debt, then move to the next: Once you’ve completely paid off your smallest debt, start paying more than the minimum payment on the next-largest account. Put the same amount of money you’d been paying on the smallest debt toward this next one.

Debt snowball strategy example

To illustrate the debt snowball strategy, let’s look at a hypothetical example in which you aim to get out of $30,000 in debt. 

First, break down your outstanding balances, from the smallest debt to the largest debt:

DebtBalanceMonthly minimum payment
Credit card #1$2,000$40
Credit card #2$3,000$50
Car loan$6,000$100
Student loan$19,000$130

Using the debt snowball method, you would first focus on paying down your smallest debt: credit card #1. Let’s say you can afford to put an extra $75 each month toward getting out of debt. Here’s what your debt payments would look like each month:

  1. Credit card #1: $115; ($40 monthly minimum payment plus an extra $75) 
  2. Credit card #2: $50 (monthly minimum payment) 
  3. Car loan: $100 (monthly minimum payment)  
  4. Student loan: $130 (monthly minimum payment) 

Once credit card #1 is paid off, it’s time to tackle credit card #2. Add the total amount you’d been paying toward credit card #1 ($115) to the monthly minimum payment for credit card #2 ($50); you’ll now be paying $165 toward credit card #2 each month. Continue the process until all your debts are paid off.  

Debt snowball vs. avalanche method

The avalanche method is another popular strategy for paying off debt. With this approach, you tackle your debts in order of highest to lowest interest rate in order to minimize your overall interest payments and get out of debt faster. Neither approach is necessarily better; it depends on your particular needs and goals. The avalanche method may help you pay off $30,000 more quickly and save on interest, but the snowball method could be more helpful in keeping you motivated.

Debt snowball methodDebt avalanche method
ApproachTackles debts in order of balanceTackles debts in order of interest rates
Psychological impactProvides quicker sense of accomplishmentRequires more patience 
Reducing number of debtsReduces number of debts more quicklyTakes longer to reduce number of debts
Ease of implementationEasier to budget for Requires more planning
Debt payoff timelineMay take longer to pay off all your debtsCan help pay off total debt more quickly
Total interest paidYou may wind up paying more total interest over timeHelps reduce total amount of interest you pay over time

Debt snowball pros and cons

As you evaluate methods for getting out of debt, consider the debt snowball method’s advantages and disadvantages.

Gain confidence and momentumYou may pay more interest over time
Reduce the number of debts more quicklyIt may take longer to pay off all your debt

Advantages of a debt snowball strategy

It can be difficult to stay optimistic when you owe money on multiple accounts. This is where the snowball method can come in handy, providing you with a sense of accomplishment as you progress through your debt payment. 

  • Gain confidence and momentum: Completely paying off a debt feels great. Tacking your smallest debts first gives you that feeling more quickly, spurring you on to keep up your efforts. 
  • Reduce the number of debts more quickly: By eliminating smaller debts, you’ll have fewer monthly payments, which can reduce stress and make it easier to manage your bills.
  • Easy to implement in your budget: Once you figure out how much extra money you can put toward getting out of debt, the snowball method is simple to work into your budget.

Downsides of a debt snowball strategy

While the debt snowball method offers its advantages, it’s important to consider the potential downsides as well. 

  • You may pay more interest over time: Prioritizing smaller debts based on balances rather than interest rates means that higher-interest debts may accrue more interest in the long run.
  • It may take longer to pay off all your debt: While the snowball method provides psychological benefits, it may not be the most efficient approach for paying off all your debts in the shortest possible timeframe.

Is the debt snowball method right for you?

If you’re still wondering if the debt snowball method could really work for you, consider the following factors. If any of these statements apply to you, you might benefit from this strategy:

  • You want a sense of accomplishment and momentum quickly. If quick wins give you the motivation you need to stick with your debt-payoff plans, the snowball method can give you that mental boost.
  • You want to reduce the number of debt payments faster. By eliminating smaller debts, you’ll have fewer monthly payments to manage, streamlining your financial management.
  • Your debts have close to the same interest rates. When the interest rate differences between your debts are minimal, the snowball method won’t necessarily lead to you paying more in interest over time.
  • Your smallest debts have the highest interest rates. If your smallest debts are also your highest-interest debts, the snowball method would allow you to spend less on interest overall in addition to its psychological benefits.

When dealing with debt, a repayment strategy can be critical in climbing out of the hole. Whether you choose the debt snowball method, the debt avalanche method, or another strategy, don’t discount the importance of creating and maintaining a budget. By taking consistent steps and making informed decisions, you can gain control of your money and work towards a debt-free future.

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Written by

Tara Blaine

Tara Blaine draws on over 20 years of experience as a writer to translate seemingly complex financial ideas into insights readers can put to work in their everyday lives. She’s written personal finance education materials for numerous institutions, helping customers learn smart techniques for budgeting, overcoming debt, saving money, and planning for their long-term financial health.


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