Debt Snowball Method: What It Is and How to Use It

With the debt snowball method, you pay your smallest debt in full first, then roll the amount that was going toward that bill into paying off your next-smallest one. The amount you're paying on your focus debt keeps growing — much like rolling a snowball down a hill.

Small victories upfront — the satisfaction of seeing debts eliminated one by one — keep you engaged. It’s very different from the debt avalanche strategy, which prioritizes high-interest debt to save money but may take longer to get the first debt wiped out.

What is the debt snowball method and how does it work?

With debt snowball, you make payments on all of your debts while putting extra money toward the account with the smallest balance. Here’s how to use the debt snowball method in five steps:

1. Make a list of all of your debts and arrange them by balance, from smallest to largest. Disregard the interest rate on each.

2. Pay the minimum monthly payment for every debt.

3. Figure out how much money beyond minimums you can devote to reducing your debt. Every month, put that extra money toward your smallest debt — even if you are paying more interest on a different one.

4. Once the smallest debt is repaid, take the entire amount you were paying toward it (monthly minimum plus your extra money) and target the next-smallest debt.

5. Keep knocking off debts and then diverting all the freed-up money toward the next debt in line.

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Debt snowball example

Here’s how this method could look in real life: If you have a hospital bill for $1,200 that the hospital is allowing you to pay interest-free, and two credit card bills for $5,000 (at 22.9% interest) and $3,000 (at 15.9%), you’d pay more than the minimum on the hospital bill first. That’s right — you’d pay the interest-free loan before you pay those that accrue interest.

Reduce interest and add payments to boost debt snowball progress

If you choose the snowball strategy, don’t ignore opportunities to find lower rates on your larger, high-interest debts, especially if your credit score is climbing. Debt consolidation, which combines multiple debts into a single payment, usually at a lower interest rate, could be an option.

• You may be able to transfer a credit card balance to a lower-rate card, or one with a 0% introductory APR.

• You could also look into a debt consolidation loan.

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While both the snowball and avalanche methods involve money you actively budget to pay down debt, you can supplement either with “debt snowflakes” — small daily savings. For example, you could occasionally downsize your daily coffee order from a large to a small and put the money saved toward paying your debt.

It’s also helpful to look for ways to free up more funds in your budget to speed up your debt snowball efforts. Some things that may help you reach debt payoff faster via the debt snowball method or a different strategy include:

• Negotiating for lower rates with your service providers — so that you spend less on the internet, your cell phone, etc.

• Boosting your income, or even picking up a side hustle.

• Setting financial boundaries with yourself and others.

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Is the debt snowball method for you?

The debt snowball strategy might sound counterproductive, because paying highest-interest debts first can save time and money, which makes the debt avalanche method a better fit for some people. But a less efficient debt snowball may be a good choice for many, even if it costs a bit more over time. If you need to front-load your payoff journey with early victories in order to stick with it, snowball is for you.

You might wonder whether you can ever pay off your debt, even with a debt snowball plan to keep you focused. If your unsecured consumer debts — such as credit cards and personal loans — would take more than five years to pay, consider exploring debt relief options.

» MORE: How to deal with debt collection