What is the Debt Snowball Method and How Does it Work?

debt payments

Subscribe To Our Blog

If you are looking to get out of debt, the snowball method is a great way to get the ball rolling – pun intended. If you’ve made a snowman before, you already understand the basic concept. As you pack more snow into a tight ball and roll it around the snow-covered yard, you gain momentum and speed as your snowball becomes a snow boulder.

The debt snowball method is a debt-reduction strategy where you pay off your debts in the order of the smallest to the largest. It gives you a sense of momentum as you not only see your balances go down, but your debtors paid in full. Here’s the basics on how it works:

  1. On a piece of paper, Word Doc, or Excel Sheet (my personal favorite), list your debts from smallest to largest. It doesn’t matter what the interest rates are when determining your list.
  2. Determine what your minimum payments need to be each month for each debt, except the smallest one.
  3. Pay as much as possible on the smallest debt.
  4. Once you pay off the smallest debt, take the money you were paying and apply it to the next smallest debt in addition to the minimum monthly payment that you were previously paying.
  5. As you pay off more of your debts, not only will you be applying the maximum amount you can afford, but you’ll be applying the previous minimum monthly payments from the debts you paid off. This is the magic of the snowball!

Yes, interest rates do matter and affect how long it takes to pay down debts, however larger debts take longer to pay off and once you gain momentum and excitement from paying down the smaller ones, you’ll be motivated to keep going and you’ll be able to pay more on the largest debt once you’ve paid off your other debts. It’s a long game.

Paying down your debt is all about mindset. Once you see your payments starting to go to the balance or principal instead of the interest, you get excited about the progress. There is an end in sight.


Hospital Bill – $200

Credit Card – $2,000 – Minimum Payment – $35

Car Loan – $5,000 – Minimum Payment – $350

Student Loans – $25,000 – Minimum Payment – $250

The hospital bill is the lowest, so you don’t need to determine the minimum payment. If you figure that you can pay a max of $100 a month, and the bill has no interest, you can have this paid off in two months.

Month #3, with the hospital bill paid, you now take $100 + the $35 minimum payment and apply it to the bill. Pending your interest rate, you can have your credit card bill paid off in about 17 months if you don’t add any additional charges.

Once you pay off your credit card, you now have $135 extra to apply to your car loan – paying a total of $485 a month ($350 + $135).

Any additional money you make or come into can be added to the snowball method to speed up the process. By the time you reach your student loans, you’ll be able to pay $735 a month instead of just $250. Paying down debt doesn’t have to be boring or disheartening, it should be exciting to see that you are paying down bills and paying them off, eventually saving money in interest and being able to plan for your future.

Laura Berendsohn

Laura Berendsohn
Washington Branch Manager, Assistant Vice President