How to Use Snowball Method to pay off Debts

How to Use Snowball Method to pay off Debts

September 29, 2021

Want to manage your budget better and cope with your debts shortly? You are not alone, as getting out of debt is a priority question for millions of Americans. If you are one of them, you will take an interest in the debt snowballing method first introduced by a talk show host Dave Ramsey. This method can be a good motivator to get out of debt. 

“But what I have learned is that personal finance is a 20 % head knowledge and 80% behavior. So it would help if you had some quick wins to stay pumped enough to get out of debt completely,” said Dave Ramsey.

Ahead is a lowdown on what debt snowballing is and how to avail of it.

What is Debt Snowballing?

The debt snowball is a debt repayment method in which a person lists all of their obligations from smallest to largest (except the mortgage), then focuses on paying off the lowest debt first, while simply making minimum monthly payments on the other debts. 

One of the hardest aspects of paying off debts is keeping the consistency of timely payments each month, especially if it’s a long-term obligation. Thus, If you are looking for a way to stay motivated in your debt-repayment journey, this method may be intriguing. Every time you clear one of your loans, you have more money to pay for other loans generating a snowball effect. 

How to Use the Snowball Method to Tackle Your Debts?

Here are the five simple steps you can undertake to obtain the desired financial wellbeing in the future: 

  1. Make a list of all your debts (except for mortgage), starting from smallest to largest, without considering the interest rates.
  2. Make another list of the minimum monthly payments for all your debts.
  3. Start paying the smallest possible amount on each of your loans (apart from the smallest debt) every month. 
  4. Decide the maximum possible amount you can appropriate for the smallest debt you owe. 
  5. As soon as your smallest debt is repaid, target the next smallest one and repeat the same steps (repay minimum payment due and maximum possible amount for smallest debt) until your debts are fully repaid.

Remember that debt snowballing is just one of the many debt repayment strategies. As you don’t look at the interest rates, you count each sum you owe; debt-snowballing may not be the most cost-effective method. 

The Pros and Cons of Debt Snowballing

Let’s look at the advantages and disadvantages of the snowball debt strategy in order to decide if it’s applicable to your situation. 


Motivation: One of the main benefits of the debt snowballing method is its psychological effect. Seeing quick results will help you stay motivated and will encourage you to strive hard to pay off your debts. 

Development of Healthy Spending Habits: It is much easier to give up and multiply your debts when you are in the black and don’t see any progress. While with this strategy, you will keep track of your spendings, and eventually become a wiser spender. 

Simplicity: You don’t have to work out formulas or count interest rates to decide which of your debts to repay first. Snowball debt method is anything but complex calculations. 

These are some of the advantages of the snowballing debt approach, but before you decide whether or not this strategy is good for you, let’s consider some of the disadvantages.


Paying More Money: When you focus on the number of your debts rather than interest rates, you may end up paying more on interest because larger debts may have higher interest rates. Thus, if you have high-interest rate debts, the financial experts don’t recommend adhering to debt snowballing until these high-interest debts are lowered at least. 

Difficulties to Get Credit in the Future: Following the debt snowballing method that suggests closing down your credit card accounts once they are repaid will make it harder to get credit in the future. 

While those who stay motivated from quick victories may benefit from debt snowballing, the others for whom the numbers matter may not find it appropriate. Instead, the latter will prefer to pay off the highest interest rate debts first. If you are one of them, consider the avalanche method to attack your debts. 

No one wants to live with a debt burden, so pick the strategy that works best for you and start working out your debt-free tomorrow.