Paying Off Debt With the Debt Snowball Method

A guide on what the snowball method is and how to use it


If you’re one of the countless Americans wondering how to pay off debt, you’ll probably be relieved to hear there’s more than one way to do it. And one of those ways is the snowball method.

If you’re asking yourself, “What is the snowball method?,” read on. It’s a payoff strategy that focuses on the smallest amount of outstanding debt first. After you’ve paid off the smallest debt, that money will snowball into paying off the rest of your debt.

How Does the Debt Snowball Method Work?

The debt snowball method focuses on small victories. This is accomplished by paying off your smallest debt first, then your next-smallest debt and so on until you’re debt free.

Here are some suggestions that can help get you started on using the snowball method:

1. Make a List of Your Debts

Create a spreadsheet or get out a notepad and write down each outstanding debt you have. This can include credit cards, student loans, medical bills and whatever other type of debt you have. Include information like the full amount you owe, minimum monthly payment, interest rate and monthly due date, just to stay on track. 

2. Make On-time Payments

You’ll want to make the minimum monthly payment on all your debts. Payment history makes up 35% of your total credit score. So the more on-time payments you make, the less fees you’ll be charged and the more positive impact they can have on your credit score.

3. Focus on Paying Off the Smallest Debt 

While you make minimum payments on the rest of your debts, put any extra funds available toward your smallest debt. 

If you’re looking for ways to find extra income to help with this, consider selling unused items around the house or even finding a side hustle. Wherever extra income comes from, you can put it toward that smallest debt.

4. Repeat Until Complete

Continue putting all your extra cash toward that smallest debt until it’s paid off. Then you can apply the money you were paying on that debt to your next-smallest debt. Do this until all your outstanding debts are paid in full.

The Debt Snowball Method in Action

Wondering how this might actually work? Here’s an example of what the snowball method could look like in action:

Account Type Interest Rate Min. Monthly Payment Balance
Medical Bill 0% $125 $1,500
Credit Card 1 24% $100 $3,000
Credit Card 2 16% $130 $4,000
Car Loan 3% $218 $7,500
Student Loan 4% $122 $10,000
Total Min. Due   $695

 

 

In this example, the medical bill is the smallest debt. So with the snowball method, you put any extra money you have available toward that bill. 

At the same time, you’ll make the minimum monthly payments on all the other debts.

Once that bill is paid off, you can focus on the next-smallest bill, credit card 1. Roll the funds you were using to pay the medical bill—and any other extra cash you might have—into paying off that bill next. 

Once the medical bill and credit card 1 are paid off, the process is repeated with credit card 2, the car loan and then the student loan. The amount you can pay on each bill will continue to snowball until you have all your debts paid off.

The Disadvantage of This Method

While the debt snowball method is good for people who like to see progress quickly as they pay off smaller debts, it may not always be the most cost-efficient strategy in the long run. 

The debt snowball method focuses on the smallest debt first, regardless of the total amount owed or what interest rate you’re paying. The higher the interest rate, the more you’ll pay over the life of the loan. If you have a lot of outstanding credit card debt or large amounts of debt, this might not be the right plan for you. 

Choosing the Right Debt Payoff Strategy

The debt snowball method is one way to pay off debt, but it’s not the only way. There are other options to choose from. 

Debt Avalanche Method

Instead of focusing on the smallest debt, the avalanche method puts the priority on the debt with the highest interest rate. It could take longer to see results compared with the debt snowball method, but you can save more in interest payments over the total life of your debts.

Debt Consolidation

If you have a lot of different types of debt, you might want to try debt consolidation. This is when you take out a personal loan to pay off all your outstanding debt, then make a single payment to your new personal loan. This can help streamline your debt, giving you one due date and payment instead of many. 

This may be a good option if you can get an interest rate lower than what you’re paying now. Otherwise, it might not be worth consolidating. Instead, you might want to explore other cost-saving options.

Credit Card Balance Transfer 

Carrying a balance on your credit cards can cause interest charges to add up. In this situation, if you want to avoid high interest charges, you might consider a balance transfer. This lets you move unpaid debt from one or more accounts to a new or different credit card. It can help you consolidate debt or get a lower interest rate, which could help you pay off your debt faster. 

Just be sure to review all the terms and conditions before applying. Especially since there may be fees associated with a balance transfer. Plus, you’ll want to check what interest rate you could be charged once the introductory rate ends. And keep in mind how canceling any old cards might affect your credit score.

What to Do if You Can’t Pay Your Bills

If you’re struggling to make payments on your bills or outstanding debt, a first step to consider is contacting your lender. Try to do this before a late payment comes up. Many lenders will work with you to come up with a plan that’s best for you and your finances. 

If you’ve already missed payments or you’re behind on many of your bills, don’t panic. Consider contacting a nonprofit credit counseling agency. These agencies contact lenders on your behalf to help work out payment plans. They can also help you create a repayment strategy and a budget that fits your current needs. 

Should You Try the Debt Snowball Method?

If you’re looking to quickly pay down your smallest debts first, the snowball method may be a good place to start. But consider different debt payoff strategies until you find the one that works for you. 

Just remember, there’s more than one method that can help you pay off debt. Consider your unique financial situation and the different types of debt you have to help you choose which approach to take.


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Government and private relief efforts vary by location and may have changed since this article was published. Consult a financial adviser or the relevant government agencies and private lenders for the most current information.

We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.

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