Debt Snowball Method

What Is the Debt Snowball Method?

The debt snowball is a repayment strategy where you pay off debts from smallest balance to largest — regardless of interest rate.

Once the smallest debt is paid off, you roll that payment into the next smallest.

Momentum builds like a snowball.

Why the Debt Snowball Works

It focuses on:

• Psychological wins
• Motivation
• Behavioral momentum

While it may not minimize interest costs, it can increase consistency.

Example

Debts:

• $500 credit card
• $2,000 personal loan
• $10,000 auto loan

You eliminate the $500 first, then move to $2,000, then $10,000.

Related Terms

• Debt Avalanche
• Debt Repayment
• Interest Rate
• Credit Utilization
• Debt Management Plan

Back to All Financial Terms