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Published 19 September 2023
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How To Use the Debt Snowball Method To Pay Off Debt

You pay off debts in order from smallest to largest, which can help you rack up some quick wins for motivation.

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With the debt snowball method, you reward yourself for wins along your debt payoff journey. You pay your smallest debt in full first, then roll the amount that was going toward that bill into paying off your next biggest one. The amount you’re paying on your focus debt keeps growing – much like rolling a snowball down a hill.

Small victories upfront – the satisfaction of seeing debts eliminated one by one – keep you engaged. It’s very different from the debt avalanche strategy, which prioritises high-interest debt to save money but may take longer to get the first debt wiped out.  But the debt snowball method is likely to mean your debt costs more in the long run, because you are not focusing on costs but instead, your ability to fund repayments.

Using the debt snowball method

First, be sure that you’ve budgeted enough to cover the minimum monthly payment for every debt. Now, arrange the debts by balance, from smallest to largest. Disregard the interest rate on each. Also check if you are able to make overpayments on your loans, or if there are fees or limits. 

You will also need to budget for an extra amount of cash to put towards your target debt each month. It’s important that this is realistic and that the rest of your finances won’t suffer.

Every month, make the minimum payment on your smallest debt, plus this extra amount – even if you are paying more interest on a different one. Once the smallest debt is repaid, take the entire amount you were paying toward it (monthly minimum plus your extra money) and target the next-smallest debt. Keep knocking off debts and then diverting all the freed-up money toward the next debt in line. 

Here’s how it could look in real life. You have three credit cards, with balances of:

  • £3,200 at 29.5% interest
  • £900 at 10.9% interest
  • £4,400 at 23.9% interest 

In this scenario, you’d pay your £900 bill first, as it’s the smallest amount – even though you have higher-interest debt elsewhere. 

This can make numbers people crazy because it saves time and money to pay off the highest-interest debts first. If this sounds like you, targeting those debts and paying off your highest-interest debt first might be a better fit. 

But if you want to front-load your payoff plan with early victories to stick with it, snowball could be for you.

Look for lower rates and ways to pay more

If you choose the snowball strategy and your high-interest debts are also the largest, don’t ignore opportunities to find lower rates. 

You may be able to transfer a credit card balance to a lower-rate card.

You could also look into a debt consolidation loan.

You might wonder whether you can ever pay off your debt, even with a debt snowball plan to keep you focused. If your unsecured consumer debts – such as credit cards and personal loans – would take more than five years to pay, consider your options for debt help.

While the snowball method involves actively budgeting, you can always increase the amount of cash you put towards paying off your debt. For example, if you’re having a clear out and you sell your stuff, the money you earn could go straight towards your target debt to hasten your progress.

Is a debt snowball for you?

In general you’ll make more savings on interest payments by paying off the highest interest debt first. But if you’re prone to abandoning plans, the debt snowball method could encourage you to keep going, even if the process takes longer and costs more over time.

Achieving subgoals can help you stick with your overall plan. If a debt snowball offers the kind of reinforcement that will keep you motivated, it may be worth the premium to get your finances on track.

Get free expert debt advice

You can contact a free, independent debt advice service or debt charity. A debt adviser will be able to discuss your circumstances and help find the best way to tackle your debt.

They can also help you apply for temporary protection from your creditors through the ‘Breathing Space’ scheme if you live in England and Wales. In Scotland you can get similar protection from a programme called the Debt Arrangement Scheme. Northern Ireland doesn’t currently offer an equivalent scheme.

Dealing with debt can be stressful and it’s just as important to take care of your mental health. Charities, such as Mind and Mental Health UK, can give you tools and resources to help ensure you’re supported.

Image source: Getty Images

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