The snowball method, explained

Resources · Paying off debt · 4 min read Starting out

Key points

• The snowball method pays off your smallest balance first, whatever its interest rate.
• You keep paying the minimum on everything else and throw any extra at that one debt.
• When a debt is gone, its payment rolls into the next smallest, so your payment grows.
• It can cost a bit more interest than other orders. In return, you get earlier wins.

How the snowball method works

It’s simple. List your debts from the smallest balance to the largest. Forget about the interest rates for now.

Then, every month, you do three things:

1. Pay the minimum on every debt, so nothing falls behind.
2. Put every extra dollar you can find toward the smallest balance.
3. When that debt is cleared, take everything you were paying on it and add it to the next smallest.

Each time a debt disappears, the amount aimed at your next target gets bigger. That growing payment is the “snowball”. Your total monthly payment doesn’t change. It just gets pointed at fewer and fewer debts.

A worked example

Here are three debts. The same maths works in any currency.

The minimums add up to $430. Say you can pay $650 a month in total. That leaves $220 extra.

The assumptions: interest is charged monthly at the yearly rate divided by 12, on the balance before that month’s payment. Minimum payments stay fixed. Nothing new goes on the debts. The final payment on each debt is whatever it takes to clear it.

Snowball order is smallest balance first. So Card A, then Card B, then the loan.

Month 8: Card A is gone. Its $60 minimum plus the $220 extra now go to Card B.

Month 24: Card B is gone. Everything now goes to the loan.

Month 33: the loan is paid off. You’re debt-free.

Total interest paid: $3,860.24.

Now compare paying the highest interest rate first (the avalanche method). It clears the same debts in 32 months with $3,675.50 in interest. One month sooner, $184.74 less. But your first debt isn’t gone until month 20. That’s a long time to wait for anything to cross off.

Why some people choose the snowball method

Paying off debt is as much about behaviour as it is about maths. A plan only works if you stick with it.

The biggest draw is the first win. In the example, a whole debt vanishes in month 8 instead of month 20. And every payoff after that means one less due date and one less statement to deal with.

There’s also the plain satisfaction of crossing a debt off the list. It’s proof the plan is working, right there on paper. Plus the method is easy to run. You sort by one number, the balance, and there’s nothing to second-guess.

The trade-offs

The snowball ignores interest rates. If your biggest balance also carries your highest rate, that expensive debt just sits there charging interest while you clear the small ones.

How much that matters comes down to your numbers. When your rates are fairly close together, the snowball and avalanche orders usually finish close together too. When one large debt has a much higher rate than the rest, the gap in interest gets wider.

Some people split the difference. If two debts have similar balances, they tackle the higher-rate one first. You keep most of the snowball’s feel and trim a bit of interest.

No single order suits everyone. Snowball or avalanche: how to choose puts them side by side. It really comes down to what keeps you paying month after month, and how much the extra interest bothers you.

Making the snowball work

Whichever order you pick, a few habits do most of the heavy lifting.

Never miss a minimum. The whole method depends on every debt staying current.

Keep the total payment the same. When a debt is cleared, that freed-up money goes straight to the next debt. Not back into everyday spending. This is where a lot of plans quietly stall.

Don’t add new debt. Spending on a card you’re paying down just slows everything.

And check in once a month. Update your balances so you can actually watch the snowball grow.

Common questions

Does the snowball method work?

It can, mostly because early wins help a lot of people keep going. Depending on your numbers, it may cost a little more interest than paying the highest rate first.

What is the difference between the snowball and avalanche methods?

The snowball pays the smallest balance first. The avalanche pays the highest interest rate first. In the example above, the avalanche saved $184.74, and the snowball cleared its first debt a year sooner.

Do I stop paying my other debts with the snowball method?

No. You keep paying the minimum on every debt so nothing falls behind, and put any extra toward the smallest balance.

Try it

Enter your own debts and see the month you could be clear: find your Freedom Date. Try a few different extra amounts and watch how each one moves the date.

General information only, not financial advice. Your situation is your own.