Definition
The debt snowball method is a debt payoff strategy where you make minimum payments on all debts, then put every extra dollar toward the debt with the smallest balance — regardless of interest rate. When that debt is gone, you roll its full payment into the next-smallest debt. This method maximizes psychological momentum over mathematical efficiency.
Example
You have three debts: a medical bill of $400, a credit card balance of $2,500, and a personal loan of $7,000. With the snowball method, you attack the $400 medical bill first. Once it's gone in a few months, you feel a quick win and roll that payment into the $2,500 card. Research suggests this sense of progress helps people stay on track even though the avalanche method would save more in interest.
How It's Calculated
Apply the minimum payment to every debt. Direct all extra funds to the debt with the smallest remaining balance until it's paid off, then move to the next smallest. Track each debt's balance each month, reducing by the payment minus that month's interest.
Ready to put this into practice?
Try our Debt Payoff Calculator →