Debt Consolidation

What Is a Debt Snowball?

One of the most popular ways to tackle debt is the debt snowball method. This debt repayment method helps families out of debt by teaching them to prioritize their smallest balances first.

When you’re dealing with a mountain of debt, it can be difficult to see light at the end of the tunnel. After all, digging your way out of debt can seem hopeless when you don’t have enough savings or a concrete plan.

Perhaps you’re keeping up with your bills but struggling to keep track of who you owe and how much. In that case, paying the minimum payments on your debts may be difficult enough, let alone paying any extra.

If this describes you, it’s imperative to educate yourself on all your options before your debt spirals out of control. Fortunately, there are debt repayment strategies to consider that may help you avoid ruining your credit or filing for bankruptcy.

Table of Contents

What is the debt snowball method?

How does the debt snowball method work?

Debt snowball vs. debt avalanche: Which is better?

Is the debt snowball the right option for you?

Other steps you can take to pay down debt quickly

What is the debt snowball method?

People who choose the debt snowball method of start the process by writing down all their debts from lowest balance to highest, along with the minimum payment required for each debt.

Since families who choose this method opt to prioritize their smallest debt balances first, they start the process by paying the minimum payment on all debts except for the smallest debt. When it comes to the smallest one, they analyze their spending to determine the most they can pay.

By paying the most they can afford toward their smallest debts, families who choose the debt snowball can begin eliminating their smallest bills one by one. As each small bill is paid off, they “snowball” the excess money they are no longer paying toward that debt toward the next smallest debt.

If done right, the debt snowball will ultimately leave you with fewer and fewer debts until you are finally debt-free.

How does the debt snowball method work?

Here’s an example of how the debt snowball method might work for someone in the real world:

Mr. and Mrs. Smith know they have too much debt and decide to give the debt snowball method a try. Before they begin, they sit down to write out each of their debts, their balances, their APR and their minimum payment requirements.

Once they do, they determine they owe:

  • $200 on a store credit card at 3% APR
  • $280 on a credit card at 12% APR
  • $300 on a personal loan at 15% APR
  • $499 on a credit card at 18% APR
  • $1,021 on a personal loan at 17% APR
  • Total Debt: $2,300

Once the Smiths write down these important details, they are able to put the debt snowball to work. Per the method’s guidelines, they decide to pay only the minimum payments on their four largest debt balances while paying as much as they can toward the $200 store credit card bill.

After looking at their monthly bills and income, they decide they can afford to pay $50 for their smallest debt plus the minimum balances on the rest.

So, that’s exactly what they do. And, in the course of a little over four months, their first debt is down to zero. Once the store credit card is paid off, they “snowball” their extra money toward their second-smallest balance and continue making the minimum payments on the rest of their debts.

Eventually, their two smallest debts are gone, and they move on to prioritize their third-largest debt, and so on. Eventually, the Smiths will be left with only their largest debt. With the momentum of all their extra money going toward their final debt, they will eventually become debt-free.

While this debt repayment method isn’t magic, the “snowball” component is especially helpful because it allowed the Smiths to gain momentum with each debt that is paid off. This is made possible due to the fact that each eliminated debt allowed them to make a larger payment on the next prioritized debt. By the time the Smiths got to their largest debt, their large monthly payment could make a much heftier impact.

Financial adviser Ty Hodges of Client Centric Wealth says the debt snowball provides a particularly strong incentive to stay on track because it lets you feel the impact of your efforts faster.

“With the debt snowball, you get quick wins by paying off the small cards in full first,” he said.

The following chart shows an estimation of how the debt snowball method might work for the Smiths, and how paying off small debts first could help them gain momentum as they go.

They are paying an extra $50 per month toward their smallest debts and paying minimum balances on the rest. This chart assumes the minimum monthly payment on all debts is $25. Notice how the amount they can pay toward their smallest debt gets bigger as each of the smallest debts is eliminated:


How the debt snowball method works
Debt #1: $200 at 3% APR Debt #2: $280 at 12% APR Debt #3: $300 at 15% APR Debt #4: $499 at 18% APR Debt #5: $1,021 at 17% APR
Month 1 $50 $25 $25 $25 $25
Month 2 $50 $25 $25 $25 $25
Month 3 $50 $25 $25 $25 $25
Month 4 $50 $25 $25 $25 $25
Month 5 $1.26 $73.74 $25 $25 $25
Month 6 $75 $25 $25 $25
Month 7 $44.64 $55.36 $25 $25
Month 8 $100 $25 $25
Month 9 $16.84 $108.16 $25
Month 10 $125 $25
Month 11 $125 $25
Month 12 $4.10 $145.90
Month 13 $150
Month 14 $150
Month 15 $150
Month 16 $150
Month 17 $150
Month 18 $48.08

Debt snowball vs. debt avalanche: Which is better?

When you look at the example above, it’s easy to see how the debt snowball could help the Smiths stay focused on their goal – getting out of debt. By paying off small debts first, they eliminate monthly bills faster and, as Hodges says, they get “quick wins.”

Still, it’s important to consider your other options when you’re paying off debt. One option that works almost opposite of the debt snowball is the “debt avalanche.” This debt repayment method asks you to prioritize your highest interest debts first while paying the minimum payments on your debts with the lowest rates.

If the Smiths had chosen this method instead, they would have attacked their debts in this order:

  • $499 on a credit card at 18% APR
  • $1,021 on a personal loan at 17% APR
  • $300 on a personal loan at 15% APR
  • $280 on a credit card at 12% APR
  • $200 on a store credit card at 3% APR

In some ways, it’s easy to see how the debt avalanche method could be advantageous for the Smiths. By focusing on their highest interest rate debts first, the Smiths could save money on interest and potentially pay off debt faster.

So, how do you choose between the debt snowball and the debt avalanche? Hodges says only you can decide which option is best for you.

“The debt snowball is an amazing tool because it’s simple, quick to set up and makes a huge impact very quickly,” he said. However, the debt avalanche is “the biggest bang for your buck” from a numbers standpoint since you will save more money on interest with this method.

Pros and cons of each method include:

Debt snowball:

  • Pro: The debt snowball allows you to achieve “quick wins” early on and may help you retain momentum.
  • Con: You may wind up paying lower interest debts off first, which could lead to higher interest costs.

 Debt avalanche:

  • Pro: By focusing on highest interest rate debts, you will save more money on interest. You may also pay off debts faster depending on how high your interest rates are and how much debt you have.
  • Con: This method may require more commitment since you may not eliminate debts as fast.
  • Con: The main problem with the debt avalanche is the fact that it could take more commitment if your largest debts are also at the highest interest rates. Because of this, you will not gain as much momentum at the beginning, and it could be months or even years until you eliminate one of your debts. “There are no small wins here, and you have to stay committed to the bigger goal,” said Hodges.


This could be why the Harvard Business Review suggests the debt snowball is “the best strategy for paying off credit card debt.” After analyzing anonymous research data that included credit card payments, spending patterns and account balances of 6,000 credit card users over 36 months, Harvard researchers found that consumers who concentrated their repayments on several debts paid off more debt than those who paid the same payment on all credit card accounts.

Researchers concluded that in the event consumers have similar interest rates, they should “concentrate repayments first on the cards or accounts with the smallest debts, paying off those first.”

Researchers also found that, unless it’s “possible to consolidate those debts at a substantially lower rate,” it may actually be demotivating to pool debts into a single balance. In other words, the debt avalanche method may not help people stay motivated to reach their goal of becoming debt-free.

Is the debt snowball method the right option for you?

Hodges says the debt snowball may be best for you if “you value progress over perfection.” Someone who needs small motivational wins is also a good candidate for the debt snowball, as is anyone who is worried about getting started, taking action or sticking with their plan.

“Doing something 80 percent well is way better than never starting at all because you’re overwhelmed by the process,” said Hodges.

Conversely, someone who doesn’t need that type of motivation may prefer tackling their highest interest debts first. The ideal candidate for the debt avalanche isn’t “looking for accountability partners,” said Hodges.

“They are more worried about the extra money they’ll save on interest versus small wins and staying motivated.”

Other steps you can take to pay down debt quickly

While the debt snowball and debt avalanche can help you get organized as you pay down debt, there are other strategies to consider that you can use instead of – or in addition to – these methods. Some of your options include:

  • Balance transfer with a 0% APR credit card. It may be possible to consolidate all your debts on a 0% intro APR credit card. Keep in mind that you could be required to pay a balance transfer fee if you choose this option and that your introductory 0% APR offer won’t last forever.
  • Debt consolidation. You could also consider an unsecured personal loan to consolidate debt. These loans allow you to pool all your debts into a new loan with a fixed-interest rate, a fixed repayment plan, and a fixed monthly payment.
  • Call to negotiate payment plans with creditors. The Consumer Financial Protection Bureau (CFPB) suggests you contact your creditors immediately if you’re having trouble keeping up with bills. “Tell them why it’s difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level,” they stated.
  • Cut expenses, save and attack debt. Last but not least, one of the best ways to take control of your financial situation is to figure out where your money is going every month. List out how much you earn and compare it with your fixed expenses like mortgage payments or rent, car payments and insurance premiums. From there, you can look for ways to cut discretionary expenses like food, entertainment, and clothing. Remember that every dollar you save is another dollar you can throw at your debts. And, if you cut your spending enough – at least for a while – you could move toward debt freedom a lot faster.

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