Debt Snowball Method: 6 Easy Steps to Decimate Debt

April 8, 2021

What is the Debt Snowball Method?

The debt snowball method is a strategy that uses motivational momentum to reduce, and eventually eliminate, your debts. You pay off each debt starting with your smallest and work your way up to your largest. The quick wins from paying off smaller debts give you the motivation you need to keep going until you are debt free.

How the Debt Snowball Method Works in 6 Easy Steps

How does it work? A debt calculator can do some of the number-crunching for you, but if pencil and paper is more your style, here’s what to do:

1. List all your outstanding debts.

Write down the name of each loan or credit card, its balance, and the minimum monthly payment you owe. For example, suppose your debts include:

  • An auto loan with a $3,000 balance and a $350 monthly payment
  • A personal loan with a $700 balance and a $125 monthly payment
  • A credit card with a $10,000 balance and a $200 monthly payment

2. Sort your debts from smallest to largest outstanding balance.

Using our example, you would reorder your list like this:

  • Personal loan with $700 balance—$125 per month
  • Car loan with $3,000 balance—$350 per month
  • Credit card with $10,000 balance—$200 per month

3. Pay extra toward your smallest debt.

It’s essential that you keep paying your monthly minimums to avoid late fees and dips in your credit score. But, once you’ve paid that, use any additional debt repayment funds you have to put toward your smallest debt payoff.

Going back to our example, you would keep paying the required minimums of $350 and $200 toward debts two and three, respectively.

After making those minimum payments, let’s say you discover an extra $100 on hand to accelerate your debt repayment. You add that $100 to the $125 monthly minimum you’re already paying toward debt one, your low-balance personal loan.

4. Keep at it until you pay off your smallest debt.

Repeat step three, paying the most you can each month toward debt one until your balance hits zero. If you’re able to continue contributing that extra $100, you’ll pay off your $700 balance within just four months (take a moment to celebrate your awesome achievement!).

5. Roll your money into your second-smallest debt.

Now that your personal loan debt is a thing of the past, it’s time to focus on debt two, your auto loan. Again, keep paying the minimum toward debt three. But now, in addition to the $350 you were already paying toward debt two each month, lump in the $225 you had been putting toward debt one. Now, you’ve snowballed your money and are able to pay a whopping $575 on your car loan every single month.

6. Keep going until your debt is gone.

Repeat the payment structure outlined in step five until debt two is gone. Then, roll your payments once more, and tackle the next debt on your list. Keep at it, paying and rolling money from one debt to the next, until you’ve crossed off every liability on your list.

The Magic of a Debt Snowball Plan

The debt snowball method appeals to the scientifically proven way our minds work. If you try to take down your largest debt first, you could easily get discouraged. After all, wiping out a huge debt could take years. But when you start with your smallest debt first, you’re setting yourself up for success by reaching your first debt milestone quickly. When you cross that first loan or credit card debt off your list, you build motivation and confidence to help you keep going.

Plus, once you move on to tackling larger debts after paying your small debts, you’ve got more money to put toward those outstanding balances. Instead of dividing your money across small and large debts simultaneously, you’re putting as much as you can toward the big ones, since you’ve already wiped out the little debts.

Is the Debt Snowball the Right Strategy for You? (+ Other Methods)

Countless people have found success with the debt snowball strategy, but it isn’t the only approach out there for debt reduction. One of the following strategies may work better for you:

Debt avalanche method

The debt avalanche method is a method of paying off your debts with the highest interest rate first. The advantage of the debt snowball strategy is that it increases your confidence. You can build momentum as you pay off entire lines of high-interest debts one-by-one. It also saves you money in the long run. By paying off the accounts with the most interest first, you reduce the interest you pay.

Debt snowflake method

The debt snowflake method involves finding extra money in your budget and making extra micropayments to chip away at your debt. You can combine the debt snowflake method with the debt snowball or the debt avalanche. Or, you can use it to pay off a single debt faster and save money on interest.


Another option is to refinance your existing debt by taking out a personal loan, also known as a debt consolidation loan. This strategy makes sense if your credit score has improved, you have a cosigner, or you can otherwise get a better interest rate on the refinanced loan than with your existing lines of credit.

The Bottom Line

When you’re juggling thousands of dollars of debt, it’s easy to feel like your financial life is out of control. But fortunately, the secret to conquering your money could be simpler than you think. By committing to tackling your debt one account at a time and allowing yourself those small victories, you might find your whole financial situation more manageable. If this sounds like it could work for you, the debt snowball method might just be what you need to accelerate your journey to a debt-free life.

Debt Snowball Method FAQs

How do I get out of debt with the debt snowball method?

To get out of debt with the debt snowball method, first list all of your existing debts from smallest to largest. Then, make minimum payments on all your debts, but allocate as much as you can towards the smallest debt until it’s paid in full. Repeat this process using the next smallest debt until everything is paid off.

Which is better: debt snowball method or debt avalanche method?

It depends. With the debt avalanche method, you’ll pay off debts with the highest interest rate first, which can save you more money overall. With the debt snowball method, you’ll pay off your lowest balances first, which can help keep you motivated and encouraged to keep going. No matter which method you choose, the secret to success is commitment.

Is it better to pay off small debts first?

Sometimes. Paying off small debts first can give you the positive reinforcement you need to continue healthy financial habits and meeting your goals.With every debt you pay off, you might feel more motivated to continue forward.

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