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The Debt Snowball Method: How to Pay Off Your Debt

The debt snowball method helps you pay off your debt by starting with your smallest debt balance first and then tackling the larger ones. Doing so helps you create momentum to become completely debt-free! Keep reading to learn how and why this strategy works, plus the pros and cons.

What is the debt snowball method?

Using the debt snowball method, you’ll be able to start paying off your smallest debts first before handling the bigger amounts. It’s a great way to reward yourself with wins throughout the payback process, and hopefully keep you motivated to pay off more and more. Much like a snowball rolling down a hill! Plus, this method allows you to start with the smallest amounts no matter how much the interest rate is.

How does a debt snowball work?

The debt snowball method works very similar to how people tend to manage a lot of things on their to-do list–start with the easiest task first! You’ll make a list of all the debts you owe and their amounts in order from smallest to largest. Then, you’ll pick the smallest (a.k.a. “easiest”) on your list and begin making payments with as much extra money as you can afford. With your other debts, you’ll simply pay the minimum required. As the first debt is settled, then you move on the next smallest debt and repeat the process!

How to snowball debt

Starting to snowball your debt is a relatively simple process and requires only a few steps. And luckily, it’s applicable for most kinds of consumer debt: student, personal, and auto loans, credit card balances, and medical bills. They don’t, however, work for mortgage repayments, so keep that in mind before getting the ball rolling.

  1. Get organized. Paying off debt can feel very overwhelming, so do yourself a favor and write out all of your debts. List them from the smallest balance at the top to the largest at the bottom. Don’t worry about the interest rates, monthly payment amounts, or any other loan requirements. Just focus solely on the balance amount.
  2. Pay the loan minimums. This is important, because if you don’t pay at least the minimum required on all your loans, you might be stuck paying extra fees and penalties. (And that may damage your credit score, which you definitely don’t want to do!)
  3. Pay more on your smallest balance. Every month, put any extra money you have towards the debt at the top of your list. Remember, your goal is to focus on paying off this small balance first so you can tackle the others later.
  4. Keep the momentum going. Once your smallest balance is paid off (congrats!), cross it off your list and switch your focus to the next smallest. Everything you were paying towards the first loan should now go to the next one, including the minimum payment you were already making. As you pay off each debt one at a time, your total payment will become bigger until all your debts are paid!

Pros and Cons of the Debt Snowball Method

The debt snowball method can be a great way of eliminating your debt, especially if you’re motivated by small victories and positive reinforcement. Or, if you don’t have a lot of high-interest debt. It isn’t the right method for everyone, though, so here are a few pros and cons to keep in mind to make the best decision for you.

  • Pros: The biggest advantage is the psychological benefits. It feels great to see your debts disappearing one by one, and that can increase your desire to keep paying off debt. Plus, it gets rid of extra stress by allowing yourself to focus on one debt at a time and not worry about comparing interest rates or APRs. 
  • Cons: The biggest disadvantage is that it can sometimes be more expensive overall to utilize the snowball method. This is because while you’re focusing on balances instead of loan requirements, you could end up paying more money in interests and fees. 

Pro-tip: If you’re worried about spending more money on interest, include your credit card APRs and loan rates when first getting organized and listing your debts. This will help you foresee if this strategy will be too expensive in the long run. If so, consider the Debt Avalanche Method, which prioritizes paying off your highest-interest balances first.

What To Do If You Need More Help

Sometimes we all need a little extra help, no matter how much debt you have. Here’s what to do when a debt snowball plan doesn’t seem like enough.

  • Consider Debt Settlement. This option connects you with a debt relief company that will help you manage any outstanding debts by negotiating or consolidating the balances. In exchange for a fee, you’ll work out a payment plan to pay off one large payment instead of the debt amount.
  • Opt for Credit Counseling. These are nonprofit organizations that provide educational resources and assistance with debt. They’ll help you create a debt management plan to hopefully lower your monthly payments and interest rates so you can pay off your loans as soon as possible.

Abigail Masterson

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