The debt snowball method is a debt repayment strategy where you focus on paying off your smallest debt balance first, regardless of interest rates, while making minimum payments on all other debts. Once the smallest debt is fully paid, you take the money you were using for that payment and apply it to the next smallest debt, creating a "snowball" effect that grows as you pay off each debt in order from smallest to largest until all debts are cleared
How the Debt Snowball Method Works
- List all your debts from smallest to largest balance.
- Make minimum payments on all debts except the smallest.
- Put any extra money toward paying off the smallest debt faster.
- When the smallest debt is paid off, roll that payment amount into the next smallest debt.
- Repeat this process until all debts are paid off
How It Helps You Get Out of Debt
- Psychological Motivation: Paying off smaller debts quickly gives a sense of accomplishment and momentum, encouraging you to continue tackling larger debts
- Simplified Focus: You concentrate on one debt at a time, which can make the process feel less overwhelming
- Growing Payment Amounts: As you pay off each debt, the amount you can apply to the next debt increases, accelerating your overall payoff
While the debt snowball method may not minimize interest costs as effectively as methods that prioritize higher-interest debts (like the avalanche method), its motivational benefits often make it more effective for people who need quick wins to stay committed to becoming debt-free
. In summary, the debt snowball method helps you get out of debt by building momentum through early wins, simplifying your repayment plan, and progressively increasing the amount you pay toward each subsequent debt until all are eliminated
