Debt Consolidation
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Debt Snowball Method: How It Works And How to Get Started

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The debt snowball is a method of accelerating debt repayment where you target your loan with the smallest balance and work your way up from there.

Specifically, you’ll pay the minimum on all of your debts except the one with the smallest balance. For that small-balance loan, you’ll make extra payments until it is repaid in full. You’ll then apply extra payments to your next smallest debt, and so on.

The debt snowball method aims at giving you small, quick wins to keep you motivated as you repay your debt.

Here are all the details so you can decide if it’s right for you:

What the debt snowball method is

The debt snowball method is one of many methods to repay your debt. It’s relatively low-maintenance; it doesn’t require you to sign up for any service or take out a new loan like with debt consolidation. Instead, this repayment strategy is all about putting any extra cash you have toward your smallest debt, no matter its interest rate or whether it’s secured or unsecured.

You need extra cash in your budget to make a debt snowball work. If you’re only able to make the minimum payment on your debts, then this strategy isn’t possible. That said, before you start a debt snowball, you should take a look at your budget to determine how much extra cash you have. You should be able to follow the debt snowball method without risking your financial security.

The debt snowball method is not the cheapest way to repay your debt, either, because you are starting with the lowest balance, not the debt with the highest interest rate. However, the major benefit of a debt snowball is that you’ll feel more motivated to keep going as you see small but fast victories.

How the debt snowball method works

You’ll start by making a list of all your debts, with the exception of your mortgage.

Make a list of your non-mortgage debts

Moving from your lowest balance to highest, create a list of all your non-mortgage accounts. The list should include the name of the lender or creditor, the balance you owe and your monthly payment. Your interest rate or APR on each debt isn’t important since you’re focused on the balance, but we’ve included it here as it’s still good information to know.

Here’s an example of what your debt snowball worksheet may look like:

Sample debt snowball worksheet (prioritized by balance)
Debt Balance Minimum payment APR
Store credit card $200 $10 24%
Rewards credit card $280 $15 12%
Travel rewards credit card $300 $25 18%
Personal loan $2,000 $66 17%
Auto loan $6,500 $135 8%

Analyze your budget and free up cash

If you spend more than or equal to what you earn, you won’t have any extra money to implement the debt snowball approach. To verify your cash flow, take a few minutes to look at your monthly budget as well as your bank and credit card accounts from the past two to three months.

Identify areas where you could reduce spending, particularly if it’s unnecessary. If you eat out a lot, for example, cutting back on your restaurant and fast-food spending could potentially free up hundreds of dollars a month to put toward your debt. Your situation may not be so clear-cut, however. You may choose to temporarily increase your auto insurance deductible, for example, to free up a little money each month for debt repayment.

Also think of ways you generate or come upon a one-time lump sum such as:

  • Through your income-tax refund
  • Canceling an unused cable subscription
  • Selling something you no longer need
  • Picking up a side gig
  • Renting out assets like a car or spare room

Put your extra cash toward your debt

Put the extra money you generated or found toward your debt snowball plan. Using our sample debt snowball worksheet, you’d start with your $200 store credit card debt since it has the lowest balance. Once that debt is paid off, allocate that minimum $10 payment toward the next-smallest debt, the $280 rewards credit card debt. Now, you’re paying a minimum of $30 per month, while still looking for extra money to put toward that debt.

Continue this routine, and make minimum payments on your other debt. As you pay off each debt, the money you free up “snowballs” into a bigger and bigger monthly payment you’ll use to pay off the next debt.

A debt snowball example: 7-month payoff plan

The following chart details the snowball method at work with the first three debts we listed earlier. The chart assumes you have $100 extra per month to put toward your debt:

How to snowball debt with $100 extra dollars per month
Debt & Balance Store credit card: $200 balance with $10 monthly payments Rewards credit card: $280 balance with $15 monthly payments Travel rewards credit card: $300 balance with $25 monthly payments
Month 1 $110 $15 $25
Month 2 Final payment: $90 $15 $25
Month 3 Paid off $125 $25
Month 4 Paid off Final payment: $125 $25
Month 5 Paid off Paid off $150
Month 6 Paid off Paid off Final payment: $50
Month 7 Paid off Paid off Paid off

Debt avalanche method: Another popular debt repayment strategy

A debt snowball is a popular and effective repayment method, but there’s also the debt avalanche method, too. With this method, you pay the debt with the highest interest rate first while paying the minimum payments on the remaining debt. By focusing on your highest interest rate debts first, you will save money on interest and potentially pay off debt faster.

So, the same debt prioritized by APR would look like this:

Sample debt avalanche worksheet (prioritized by APR)
Debt Balance Minimum payment APR
Store credit card $200 $10 24%
Travel rewards credit card $300 $25 18%
Personal loan $2,000 $66 17%
Rewards credit card $280 $15 12%
Auto loan $6,500 $135 8%

Debt avalanche vs. debt snowball: Pros and cons

The debt snowball may be the best method for you if seeing small wins keeps you motivated toward your bigger goal of becoming debt-free. However, if you have patience, you might consider the debt avalanche method and tackle your highest interest debts first and save more money in interest over time.

Debt snowball vs. debt avalanche: Pros and cons
Pros Cons
Debt snowball
  • Small, quick wins keep you motivated.
  • Reduce the number of bills you owe sooner.
  • Won’t save you as much money on interest as debt avalanche.
  • Requires extra cash in your budget.
Debt avalanche
  • Saves you more money on interest compared to debt snowball.
  • Prioritizes your most expensive debt.
  • Could take longer to see paid-off debts in your worksheet.
  • Requires extra cash in your budget.

More alternatives to the debt snowball method

The debt snowball method can keep you motivated on your debt repayment journey, as it’s designed to give you quick wins. However, it’s not the only strategy of debt repayment out there. Here are a few others that could work:

  • Debt avalanche method: As mentioned, the debt avalanche has you focus on paying off debt with the highest interest rate first. While you might not close out an account as quickly as you would with the debt snowball, you will save more money on interest.
  • Debt snowflaking: This method has you use small amounts of extra money toward paying off debt. If you save a few dollars by splitting lunch with a friend or even find $5 in your pocket, you would put these small amounts toward your loan. You can use this debt snowflaking mentality with either the snowball or avalanche method.
  • Debt consolidation: While the methods mentioned so far are strategies you can use on your own to manage your debt, you can also work with a lender to consolidate your debts. Through consolidation, you take out a new loan to replace your individual loans, thereby simplifying your debt into a single monthly payment. Depending on your credit, you might score a lower interest rate.

How to speed up your debt repayment

To successfully use the debt snowball strategy, you’ll need to find some extra money in your budget to pay off your debts faster. Here are some tips that can help:

  • Design a realistic budget. Taking the time to track your spending and income can help you understand exactly where your money is going from month to month. Plus, you might find some areas where you can cut down and put that money toward debt repayment instead. You can track your budget on a simple spreadsheet or use a budget-tracking app to do the heavy lifting for you.
  • Automate your payments. If possible, set up automatic payments on your debt with the smallest balances that are higher than the minimum amount due. If your minimum payment is $100, try setting up automatic payments of $150 or $200, for example. Of course, this is only a good idea if you can afford these extra payments; it’s not a wise move if you’re worried about over-drawing on your bank account.
  • Apply any windfalls toward your debt. If you get a surprise windfall, such as a bonus at work or cash as a birthday present, consider putting it toward your debt. While this might not be the most fun way to use that money, you’ll probably appreciate the sacrifice once you’re debt-free.
  • Work a side hustle. Besides finding areas to save, consider finding ways to increase your income. From selling stuff online to driving for Uber to offering freelancing services, you might be able to establish an extra income stream and use that money to pay off your debts.
  • Save up an emergency fund. Before throwing extra money at your debt, make sure you have an emergency fund saved up in case you run into an unexpected expense or lose your job. Once you have this financial cushion, you can focus on paying down your debt faster with the debt snowball or another strategy that works for you.

Deciding if the debt snowball is right for you

The debt snowball is best for consumers who would benefit from getting a psychological boost along the road to debt repayment. Because it has you focus on loans with the smallest balances first, it can help you close out a loan in full as fast as possible. If you’re more concerned with saving money on interest, however, you might do better with the debt avalanche.

Whichever method you choose, it’s important to stick with the plan. As you do, you’ll start to see your hard work pay off as you pay down your debt. Getting financially fit is empowering and provides financial freedom to build up your savings and do what you want to do in your life.


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