How to Use the Debt Snowball Method to Pay Down Your Debt

Paying down your debt can feel overwhelming. But with the right approach and plan, people don’t need to feel stuck. If you’re trying to figure out how to pay down or pay off your credit card bills, student loans and other debts, the debt snowball method is a common debt reduction strategy that might help.

Using the debt snowball method to pay off debt works by focusing your energy on one debt at a time. This helps you make progress while continuing to make the minimum payment on all of your other debts. It’s a simple and effective way to give you some quick wins and extra momentum to reach your goals.

What is the debt snowball method?

Simply put, debt snowball is a repayment strategy where you pay off your smallest balances first while making minimum payments on all other balances. Once you eliminate the debt with the smallest balance, you take that payment amount and roll it up to the next smallest debt. This creates a snowball effect, where your payments grow with each debt you pay off. So after you pay off a debt, you’ll continue ‘snowballing’ that payment amount into the next largest remaining debt, and so on.

What makes this method different? It’s not about interest rates or math. It’s about psychology. When you pay off a small debt quickly, you get a sense of accomplishment that motivates you to keep going. This emotional boost is what helps many people stick with their debt payoff plan.

Research supports this approach too. Based on behavioral economics, a 2016 study from Harvard Business Review found that people were more likely to pay off all their debts when they focused on smaller balances first, regardless of interest rates.

How to use the debt snowball strategy.

Ready to start your debt snowball? Follow these five personal finance steps to help set yourself up for success.

1. Make a list of your non-mortgage debt.

Your first step is to gather all of your debt information in one place. This includes credit card debt, personal loans, student loans, medical bills and money that you owe to family or friends. Don’t include your mortgage or car loan in this list — those are different types of debt that you’ll handle separately.

For each debt, write down your:

• Creditor’s name
• Total balance owed
• Minimum monthly payment
• Interest rate

Once you have everything listed, arrange your debt in order from the lowest balance to the largest balance. The actual dollar amounts matter here, not the minimum payments or interest rates. Your smallest balance goes first, regardless of the interest rate.

2. Review your budget.

To speed up your debt snowball, you’ll want to find extra money to put toward your smallest debt. This means taking a close look at lowering your monthly expenses to find areas in your budget where you can save money or earn more.

Look for expenses you can reduce or eliminate:

• Subscription services or apps you don’t use
• Dining and takeout orders
• Entertainment and shopping
• Unused gym memberships

Even small changes add up. Cutting $50 a month from your spending gives you $600 extra per year for debt payments.

3. Pay the smallest debt first.

Now comes the heart of the debt snowball method. It’s time to attack your smallest balance with all of your energy.

Here’s an example. Let’s say your smallest debt is a $800 credit card balance with a $25 minimum payment. If you found an extra $75 in your budget, you’d pay $100 total toward this card each month ($25 minimum + $75 extra).

Take any extra money you found in your budget and put it all toward your smallest debt.

4. Keep making the minimum payments.

While you’re working on your debt snowball, you’ll need to keep making minimum payments on your other debts to keep your accounts in good standing and protect your credit score. If possible, set up automatic payments for your minimum amounts. Late payments can result in fees, higher interest rates, and damage to your credit report.

If you’re struggling to make minimum payments, using the debt snowball paydown method might not be right for you. If this describes your financial situation, you might want to consider contacting your creditors to discuss payment plans or hardship options.

5. Snowball your payments.

Once you’ve made that final payment on your smallest debt, celebrate — take a moment to appreciate your progress.

Then, you take that entire amount that you were paying on your first debt and add it to the minimum payment of your next debt. This creates a snowball effect. As you pay off each smaller debt, your payments get bigger as you eliminate each debt.

What’s the difference between the debt snowball and debt avalanche?

Another popular paydown strategy people use is the debt avalanche method, but it works differently than the debt snowball. With a debt avalanche, you pay off debt with the highest interest rate first, regardless of the balance.

Here’s how they compare.

If you’re highly motivated by saving money and can stick to a repayment plan, the debt avalanche might work best for you. But if you need quick motivation and encouragement along the way, the debt snowball might be the better choice.

What other debt repayment strategies can I use?

While the debt snowball method works well for many people, it’s not the only option to pay off higher-interest debt. Here are other strategies to consider:

Debt consolidation. Combining multiple debts into one new debt consolidation loan, ideally with a lower interest rate, can simplify your payments and help save you money.

Balance transfer. Moving a high-interest credit card balance to a card with a 0% introductory APR offer gives you months to pay off credit card debt without interest charges.

Minimum payment plus. Pay a little extra toward all your debts each month. This works if you don’t have much extra money but want to make progress faster than minimum payments alone.

Hybrid approach. Combine elements of the debt snowball and avalanche methods by tackling a few small debts for motivation, then switching to highest interest rates for the remaining larger debts.

Final Thoughts

The best debt management strategy is the one you’ll actually follow through to completion. Remember, becoming debt-free takes time and commitment. There will be months when progress feels slow and times when you’re tempted to give up. But thousands of people have used the debt snowball method to pay off high-interest debt and build better, debt-free financial futures. And should you decide to choose this option, you can succeed, too.

DISCLAIMER: This content is for informational purposes only and should not be considered financial, investment, tax or legal advice.