The Debt Snowball Method: What Is It and How Does It Work?

The debt snowball method is a strategy for paying off multiple debts that was coined by Dave Ramsey. It’s one of several incredibly popular and commonly recommended methods of paying off debt.

Debt Snowball Method
Clear your debts with the snowball method.

What Is the Snowball Debt Method?

This approach to paying off debt has you starting with the lowest debts. The idea is that your “snowball” grows in size and gains momentum as you move to larger and larger debts. This happens as you just roll the “snow” (the money you paid for the smaller debts) into the larger debts.

How Do You Follow the Debt Snowball Method?

This method does not pay any attention to interest rates, so keep that in mind.

Start by listing all of your debts and their size. Sort the list so that the smallest debts are at the top.

For all but the smallest debt, make the minimum payment. For the smallest, pay as much as you can every month.

Just repeat the process. When you pay off the smallest debt, focus your efforts on the new smallest one.

The Pros

There are several great things about the snowball method of paying off debt. To start, it helps you create a consistent habit of paying off debt. Once it is a habit, you are unlikely to go back to just making minimum payments on everything.

The other big factor is that by starting with the smallest debt, you will see results quickly. This will give you the motivation to keep going.

The Cons

As mentioned, this method does not account for interest rates. That means that you may not pay off your debt with the highest interest rate until the end. The result could be spending more overall on interest payments.

If interest rates are a concern, try the avalanche method, which is similar but prioritizes debts based on interest rates.

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