The Debt Snowball Method: How It Works, Step by Step
The short answer: the debt snowball method pays off your debts from the smallest balance to the largest. You pay the minimum on everything, put every extra dollar on the smallest debt, and when it is gone you roll its payment into the next one. The payment grows like a snowball as each debt falls. It usually costs a little more interest than paying the highest rate first, and it gives you your first paid-off debt much sooner.
Want to skip the reading and see your own plan? The debt snowball calculator builds it month by month, and the snowball vs avalanche calculator runs the same debts both ways.
How the debt snowball method works, step by step
A debt snowball example with real numbers
Here is one household's list. The minimums add up to $520 a month, and they find $200 more, so $720 goes to debt every month. The numbers below come from the same math our calculators use: interest each month at the rate divided by 12, every debt gets its own payment, and the rest goes to the target debt. They are estimates: card issuers usually charge interest on daily balances, and real payments, rates and fees change.
| Debt | Balance | Rate (APR) | Minimum |
|---|---|---|---|
| Store card | $650 | 21.99% | $30 |
| Personal loan | $2,800 | 11.5% | $95 |
| Visa | $5,200 | 26.99% | $150 |
| Car loan | $7,800 | 7.9% | $245 |
The snowball goes in the order of the table: store card, personal loan, Visa, car loan.
| Debt | Paid off in month (snowball) | Its payment once it is the target |
|---|---|---|
| Store card | 3 | $230 ($30 minimum plus $200 extra) |
| Personal loan | 12 | $325 ($95 plus the $230) |
| Visa | 23 | $475 ($150 plus the $325) |
| Car loan | 28 | $720 ($245 plus the $475) |
Debt free in 28 months with $3,086 of interest. For comparison, the same minimums with no extra money and the same rollover finish in 43 months and cost $5,506 in interest. The $200 a month did that, and the snowball made sure it always landed on one debt.
Debt snowball vs debt avalanche on the same debts
The debt avalanche uses the same rollover but orders the list by interest rate, highest first. On this household's debts it goes Visa, store card, personal loan, car loan.
| Snowball | Avalanche | |
|---|---|---|
| Debt free in | 28 months | 27 months |
| Total interest | $3,086 | $2,663 |
| First debt paid off | Store card, month 3 | Visa, month 19 |
The avalanche saves about $420 and finishes 1 month sooner. The snowball gets the first win in month 3 instead of month 19. That is the whole trade: a little more interest in exchange for a debt crossed off in the first few months instead of more than a year and a half of watching the highest-rate balance shrink slowly.
When the smallest-balance order and the highest-rate order are the same list, the two methods pay your debts in the same order and cost exactly the same. The gap grows when a small debt has a low rate and a large one has a high rate, like the personal loan and the Visa above. To see your own gap in dollars, put your list in the snowball vs avalanche calculator or run it in the debt avalanche calculator.
Why people pick the snowball anyway
Paying off debt takes years for most people, and the hard part is usually not the math. It is keeping the extra $200 pointed at debt in month 14, when nothing feels different. A paid-off account is something you can see.
Research backs part of that, with a warning attached. In a 2015 study in the Journal of Marketing Research, economists Alexander Brown and Joanna Lahey at Texas A&M found that people finished a long task faster when its parts were arranged from shortest to longest. They wrote that this may make paying the smallest debts first worth it in some cases, and also that the boost in motivation may not make up for the extra interest. Their experiment was a typing task, not real debts, so treat it as a reason the snowball can work for you, not as proof that it beats the avalanche.
My honest take: if you know you will stick with any plan, the avalanche saves money. If you have started and stopped before, the snowball's quick win is worth a few hundred dollars of interest, because a plan you quit costs far more than either.
Making the debt snowball work
- Find the extra first. The snowball works with no extra money, because every paid-off minimum still rolls on, but even a small extra amount speeds it up. Our guide on the debt snowball with no extra money shows how the rollover alone still helps.
- Stop adding to the cards. A snowball cannot outrun new charges. If a card you paid off gets used again, it goes back on the list.
- Keep a small cushion. One car repair on a credit card can wipe out two months of progress. A small emergency fund keeps the snowball rolling when something breaks.
- Lower the rate where you can. A 0% balance transfer can make the snowball cheaper, if the fee and the promo length make sense. Check it with the balance transfer calculator, and compare a loan with the debt consolidation calculator.
- Write it down. A list on the fridge with each debt crossed off as it goes does a lot of the motivating. You can print one from our debt payoff worksheets.
- Watch your credit card balances fall. Paying cards down also lowers your credit utilization, the share of your card limits you are using, which is a big part of most credit scores.
When the debt snowball is not the right tool
If your minimum payments are more than you can cover each month, the order you pay in does not matter yet. The first job is a budget that covers the minimums, a call to your card companies about hardship programs, or a talk with a nonprofit credit counselor. Our page on debt relief options compares credit counseling, debt management plans, consolidation and settlement honestly, including the risks.
If one debt has a very high rate and a large balance, like a card near 30%, the snowball can cost real money. In that case some people clear one tiny balance first for the win and then switch to the highest rate. Nothing stops you from mixing the two.
Questions about the debt snowball method
What is the debt snowball method?
A way to pay off debt from the smallest balance to the largest. You pay the minimum on every debt, put all your extra money on the smallest one, and when it is paid off you add its payment to the next smallest. The payment grows with each debt you clear.
Does the debt snowball include my mortgage?
Usually not. Dave Ramsey's version lists your nonmortgage debts and deals with the house later. You can include it, but a mortgage is usually the largest balance and comes last anyway, so leaving it off changes little.
Is the debt snowball or the debt avalanche better?
The avalanche, highest rate first, almost always costs less interest. The snowball gives you a paid-off debt sooner. In the example on this page the avalanche saves about $420 and one month, while the snowball's first payoff comes in month 3 instead of month 19.
Does the debt snowball work with no extra money?
Yes. Each paid-off debt's minimum still rolls into the next one, so the payments speed up over time even with no extra. In the example on this page the rollover alone finishes in 43 months; adding $200 a month brings it to 28.
What if two debts have about the same balance?
Put the one with the higher interest rate first. It costs a little less, and with balances that close your first win comes at about the same time. In our calculators an exact tie goes in the order you type the debts, so type the higher-rate one first.