What is the Debt Snowball Method?

The Debt Snowball Method is a debt repayment strategy where you pay off your debts in order from smallest balance to largest balance, regardless of the interest rate. Once the smallest debt is paid off, you take the money you were paying on that debt and add it to the payment of the next smallest debt. This creates a "snowball" effect, where your payments grow larger and larger as you pay off each successive debt.

This method focuses on psychological wins to keep you motivated. Seeing smaller debts disappear quickly provides a powerful boost, helping you stay committed to your debt payoff plan.

How Does the Debt Snowball Method Work?

Implementing the Debt Snowball is straightforward:

1. List All Your Debts: Gather all your debts (credit cards, personal loans, car loans, etc.) and list them from the smallest balance to the largest balance. Ignore interest rates for this step.
2. Make Minimum Payments: Pay the minimum required payment on all your debts, except for the smallest one.
3. Attack the Smallest Debt: Put as much extra money as you possibly can towards your smallest debt. This might come from cutting expenses, picking up extra work, or reallocating funds.
4. Roll It Over: Once your smallest debt is completely paid off, congratulations! Now, take the money you were paying on that debt (its minimum payment + any extra you were adding) and add it to the minimum payment of your next smallest debt.
5. Repeat: Continue this process. As each debt is paid off, you "snowball" its previous payment into the next debt. Your payments grow, and your debt shrinks faster and faster!

This systematic approach builds incredible debt repayment momentum.

Benefits of the Debt Snowball

Who is the Debt Snowball Method For?

The Debt Snowball Method is particularly effective for individuals who:

If you're wondering how to get out of debt and need that initial push, the debt snowball could be your ideal solution!