What Is the Debt Snowball? Overview, And How It Works

Are you looking forward to getting out of debt for good? Be sure you’ve arrived at the place of solution. Here’s to announce to you a new friend and which is the fastest way to get out of debt – the debt snowball method!

If you found yourself or grew up around snow regions, you realize that the fastest way to build a snowball is to actually gather some snow right into a tight ball and roll it around your yard.

As you gain possession of momentum and speed, your snowball grows into a snow boulder.

You may want to know why in the world we are talking about snowballs. Because when you make use of this technique to pay off your debt, I can assure you, you will cover your debt in no time.

And if you follow these Baby Steps, you’ll use this method when you get to the second baby Step-meaning you are currently on each bill of yours and have a $1,000 starter emergency fund.

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How Does the Debt Snowball Method Work?

The debt snowball method is a debt-reduction strategy where you make payments for debt in a sequence of smallest to largest, gathering momentum as you knock out every remaining balance.

When you fully pay the smallest debt, you can roll the payment of the lowest limits you were making on that debt into the subsequent-smallest debt payment.

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This is how it works:

There’s the money icon

You can pay off debt faster by following these steps: 

Step 1: Create a list of your debts right from smallest to largest, irrespective of interest rate. Check the next step.

Step 2: Make minimum payments on all your debts, excluding the smallest. Check the next step.

Step 3: Make as much as payment as possible on your smallest debt. Check the next step.

Step 4: Do this over and again until you pay up every debt in full. Check the next step.

Now, before you show the interest rates, you must follow through with the already laid down process.

If your greatest debt has the greatest interest rate, it will take a long time before you see an impact on that insane balance of yours.

However, when you adhere to the plan, especially without having to worry about interest rates, you’ll jump up and down out of ecstasy when you must have paid off that smallest debt quickly.

That ecstatic feeling you have is what would get you motivated to keep working harder to the point of no debt. But more on this later.

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Why Does the Debt Snowball Method Work?

The debt snowball works because it’s all about modifying or even refining your behavior. You don’t need to hold a math degree or need to have been to business school to stroke debt. 

Winning with money is about 80% of behavior and only 20% of head knowledge. If you can get that person in the mirror to change their habits, there’s no stopping you!

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What about Interest Rates?

If you pay on the student loan in the first place, just because it’s the greatest debt, you won’t be able to dismiss it for a while.

You will realize how the numbers are depreciating on the balance, but soon enough you’ll lose motivation and then stop paying extra.

Why is this so? This is because it takes eternal life to get a victory! And you will still have each of your other small, exasperating debts lingering around, too.

But when you discard the smallest debt first, you get to realize the progress quickly! And then you realize that the debt doesn’t exist eternally anymore in your life.

The second debt then follows suit soon enough and then the next, then the next. Suddenly, you put hundreds of dollars every single month toward your debts instead of small expanding minimum payments.

Now, when you discover your snowball is literally functional, you are almost certain you will be more likely to do it. Next up, what you know is you’ll scream in all ecstasy that “I’m debt-free!” just in no time.

An Example of the Debt Snowball

One surest and easiest way to understand this method is by mapping out real-life examples. Let’s say you have four different debts:

  1. $2,500 credit card debt—$63 payment
  2. $7,000 car loan—$135 payment
  3. $10,000 student loan—$96 payment
  4. $500 medical bill—$50 payment

Since you pay $550 every month on the medical bill, this certain $50 minimum payment besides the extra $500, that debt is totally gone in a single month. Now you can take the freed-up $550 and attack your credit card debt, paying $613, i.e. $550 besides the $63 minimum payment.

You realize that in a matter of four months; you are certain you will wave goodbye to that credit card with merriment.

Next, you’ll power that car loan right in the face to the tune of $748 each month, which is like $613 + $135. And in ten months, you will drive off right into the sunset in a vehicle you literally own.

After getting to the time you reach reverential student loan, which is your highest debt, you can put $844 a month toward it. That literally implies you’ll have to be sending Sallie Mae your last payment in a year.

With all of your hard work and sacrifices, putting extra money into the snowball, and directing all your attention on the goal, this means you will have paid off $20,000 in simply 27 months, making use of the debt snowball method. That explains how amazing the snowball method is! 

Making use of the debt snowball method, you’ve got to make payments on low limits on every single thing except the $500 medical bill. And since you have your attention on your goal, you get to decide if to get a side job by bringing in an extra $500 every month and including it in your snowball.

So, there have been some fair, although strong, arguments about Debt Snowball and Debt Avalanche… you can read through this to better understand the difference between both terms.

Debt Snowball vs. Debt Avalanche

One of the most powerful arguments, yet interesting, is for the snowball method is more psychological than financial.

It supposes that the gratification that you’ll derive from paying off smaller debts will definitely keep you motivated just so you can pay off higher ones. That perhaps is true for many people.

Paying off debts with the largest interest rates first, the debt avalanche method will reduce your sum debt charge quicker.

That’s because they will gather your high-interest debts together even with extra interest while you’re just paying the minimum expected on them.

Luckily, it’s quite possible that your smallest debts also could be the ones with the largest interest rates.

For instance, it seems likely that your credit card debt isn’t just your smallest debt, rather the one with the largest interest rate. And your high student loan may carry the lowest interest rate.

If that is the case, you won’t have to select between the debt snowball method and the debt avalanche method. You will then have to practice both simultaneously.

Consequently, put into consideration trying to compare the best debt solidification loans if you’re interested in saving money on interest while you pay off your debt.

Frequently Asked Questions (FAQs)

Why do I list my debt in order of payoff balance, instead of interest rate?

The actual point of the debt snowball is behavioral change. If or when you try to pay off your student loan first due to it being the largest debt, you will find results for a long time.

And without results, you won’t have motivation. And with motivation non-existent, you’ll likely lose zeal and stop extra payments on such loans. Meanwhile, every single smaller debt of yours still will hang around.

But when you actually pay off the small debt first, you’ll experience the level of progress. And progress actually generates motivation, because you’ll now feel you could accomplish something.

Irrespective of how small that first debt is, it’ll cease to remain in your life – forever. And soon enough, the second debt follows, and then the next. Victories here and there give you that sort of confidence to go all the way. And not just that, you’ll see how the plan is working and you’ll stand by such a system.

What if I get laid off from my job while paying off debt?

If for any reason you get relieved of your duty, subscribe to the survival mode. Ensure you reduce your lifestyle to the barest. You may keep making your minimum payments without having to put anything extra toward debt. You may halt the snowball until you find work again.

If you get severance payment, don’t kick back by living off of that; try not touching it. Instead, get a transient side job.

Meanwhile, the sooner you get a new job and possibly find that “dream job”, the sooner that severance payment looks like a huge bonus, you can apply toward your debt snowball.

If I already have money saved, should I put that toward my debt snowball?

If you have non-retirement money saved up, you may keep $1,000 of that for a beginner emergency fund. Then you can make use of the rest to pay off non-mortgage debt. Never use retirement funds – this is because those do come with a huge tax hit and early withdrawal penalty.

And as soon as you can complete your snowball, you may pile up cash to build the full emergency fund as soon as possible.

Should I pause the debt snowball to pay for a wedding?

You ought to get the government off your back promptly. You can pause your debt snowball to clean up your IRS bill since the government can take money without literally having to sue you.


Right in the end, the only indisputable point to note about paying off debt is the fact that you will need to be devoted to the process. This is so because you most likely didn’t fall into debt suddenly and it’s even much more likely you will not get out of debt suddenly.

Having stated all of that, regardless of how you work the figures, it takes time and devotion to get there.



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