Debt Snowball Strategy: How Does It Work?

Quick Answer

By tackling your smaller balances first and increasing your payments with each debt, you can save big on interest and shave years off your debt payoff plan with the debt snowball strategy.

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The debt snowball method is a debt repayment strategy that focuses on your lowest balances first and manages your payments to accelerate your path to debt freedom.

While the debt snowball method is not the only way to pay off debt faster, it's a valuable approach if you're disciplined and follow the steps. Here's how it works and what to consider before using it.

What Is the Debt Snowball Method?

The debt snowball approach is primarily used for paying down high-interest credit card debt, but you can use it to pay down any non-mortgage debt.

With this approach, you'll pay the minimum amount due on all of your credit cards and loans, then take any extra amount you can afford and add it to your minimum payment on the account with the lowest balance.

Once you've paid off the balance, you'll then take the amount that you were paying toward it and add it to your minimum payment on the account with the next-lowest balance. You'll keep doing this, creating a snowball effect with each debt you pay off until you eliminate all of your debt.

How to Pay Off Debt Using the Snowball Method

Let's say you have four loan and credit card balances you want to pay off. Here's how you'll approach your debt with the snowball method:

  1. Set up automatic payments on all of your accounts for the minimum amount due.
  2. Review your budget for extra cash flow you can put toward your debt each month.
  3. Add the extra amount to the payment on your smallest balance.
  4. Once that debt is paid off, add the full amount you were putting toward it (the minimum payment plus extra) to your payment on the next-smallest balance.
  5. After the second debt is paid off, take the full payment, including the minimum amount and extra amount from the first debt, and add it to your payment on the next-smallest balance.
  6. Once the third debt is paid off, you'll put the full amount you've been paying toward your debts toward your final balance until it's paid off.

Note that if you're paying down credit cards with the snowball approach, it's a good idea to avoid adding more debt to them once you've paid off a balance.

Debt Snowball Example

Let's say you have three loans and two credit cards with balances you're trying to pay off. The table below illustrates the balances and annual percentage rates (APRs) of each type of debt:

Debt Balances and APRs Example
Balance APR
Student loan $20,000 8.5%
Auto loan $12,000 5%
Personal loan $15,000 16%
Credit card 1 $10,000 25%
Credit card 2 $2,000 14%
Total $59,000

The following table shows your total interest charges and amount of time to pay off the debt if you only make minimum payments each month (Tab 1), total interest charges and payoff timeline with the snowball method and no extra payments (Tab 2) and the impact having $150 extra per month to add to your debt snowball would make on your debts (Tab 3).

Using the debt snowball method, you would first tackle the debt on credit card 2, as it has the lowest balance. When that's paid off, you'd add the payment you were making on credit card 2 to the minimum payment for credit card 1, and so on until all your debts are paid off.

Debt Payoff Without the Snowball Method
Monthly Payment Payoff Term Total Interest
Student loan $247.97 10 years $9,756.57
Auto loan $226.45 5 years $1,587.29
Personal loan $527.36 3 years $3,984.80
Credit card 1 $308.33 4 years, 7 months $6,838.87
Credit card 2 $43.33 5 years, 7 months $888.74
Total $1,353.44 $23,056.27

As you can see, even if you can't manage to put any extra money toward your debt, using the snowball method will result in you paying off your debts more than five years sooner, and you'll save more than $4,300 in interest.

But if you can manage to put even a little extra money toward your payments each month, you'll become debt-free even faster and pay thousands less in interest.

Pros and Cons of the Debt Snowball Method

Before you proceed with the debt snowball strategy, it's important to consider both the advantages and disadvantages that come with it.


  • Helps you save money: Even if you can't put extra money toward your debt right now, the snowball approach can help you save hundreds or even thousands of dollars in interest.
  • Accelerates your debt payoff: As you utilize the strategy's snowball effect, you may be able to cut years off of your debt repayment plan, freeing up that cash flow for other financial goals sooner.
  • Can help you stay motivated: As with any debt repayment strategy, you'll need to be disciplined and consistent with the debt snowball approach. However, paying off smaller balances early on can help you stay motivated toward your goal.


  • May not maximize your interest savings: If you want to accelerate your debt repayment and save as much money on interest as possible, the debt avalanche method may be a better option—more on that in a minute.
  • Can take a bit longer: If your largest balances also have your highest interest rates, it can take longer for you to pay off your debt, especially if the minimum payment on your largest balances is relatively low.
  • You'll need to stay focused: As you pay off balances, it can be tempting to rack up more debt, especially if you've had trouble with overspending in the past. Using the extra cash flow you get with each debt you pay off for other purposes may also be enticing. In other words, the debt snowball approach won't magically change your habits, so you'll need to stay focused on your objective.

Other Ways to Pay Off Debt

As you consider whether the debt snowball method is the right move for you, here are some other potential approaches you can take:

  • Debt avalanche method: The debt avalanche method works similarly to the snowball approach, but instead of paying off the lowest balances first, it targets the accounts with the highest interest rates. The idea is that by eliminating the most expensive debts first, you'll save more money on interest.
  • Debt consolidation: Consolidating debt with a personal consolidation loan or a balance transfer credit card involves paying off multiple balances with a new loan or card. Benefits may include a lower interest rate and a more simplified repayment plan. However, these options are best if you have good or excellent credit, and it's important to still have a strategy to pay down the debt once you consolidate.
  • Credit counseling: If you're worried about falling behind on payments, you may consider consulting with a credit counselor who can offer personalized advice. If you have a lot of credit card debt, the counselor may suggest a debt management plan, in which the counselor negotiates a lower interest rate and monthly payment, giving you an affordable repayment plan. There are fees associated with debt management plans, and you may also be required to close your credit card accounts.

Keep an Eye on Your Credit Throughout the Process

As you work on paying down your debt, check your credit scores regularly to keep track of your progress and also to make sure you don't hit any snags. If you're paying off debt to improve your credit and incorrect or fraudulent information gets added to your credit reports, it could halt your progress. And if you don't catch such things early, it could do more damage over time.

Eliminating debt and improving your credit history won't happen overnight. But if you're disciplined and stick to your strategy, you could save years' worth of time and interest charges, both of which you can spend working toward meaningful and exciting financial goals.