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What Is The Debt Snowball Method?

December 10, 2020

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The debt snowball method can be a great way to handle paying off multiple different kinds of debt. 

This article will go over how the method works to see if it’s right for you.

What is the Debt Snowball Method?

The average 18- to 34-year-old has between $22,000 and $42,000 of debt. And since most of us aren’t financial experts, we need simple strategies to pay it all off. 

Enter the Debt Snowball Method. This method says pay your smallest debt off first, then the next largest, and so on till you’re debt free. 

With this method, you don’t pay attention to the interest rate. Instead, you look at the amount of money you owe. 

The idea is that paying off one thing in full will motivate you to continue because you feel like you’re making progress.

How to use the Debt Snowball Method

This method of paying off what you owe is helpful because it gives you a schedule. Here’s how you can start using the Debt Snowball Method in your financial life.

Step 1: Make a list of debts

The first thing you want to do is list out every debt you have to pay. Then put the list in order from the smallest to largest amounts. If you have a mortgage, don’t include it in this list.

For example, say you have three debts, ordered from smallest to largest:

  • Credit card: $450

  • Car loan: $3,000

  • Student loan: $8,000

Step 2: Continue making minimum payments

Don’t stop making minimum payments every month on all your debts, including the one you’re currently paying off with the Debt Snowball Method.

In this example, let’s say your minimum payments are:

  • Credit card: $40

  • Car loan: $150

  • Student loan: $125

Step 3: Figure out how much extra you can pay each month

Even if it’s only $25, any additional amount toward your debt will help. You will put that additional amount toward your smallest debt every month until the debt is fully paid off. 

Or you could make room in your budget to pay off even more. Let’s say you have an extra $250 per month because you took on a side gig and cut down on your expenses.

Thus, every month, you’ll pay $290 total ($250 + $40 minimum payment) on your smallest debt — your credit card debt. 

And good news: It’ll only take you two months to pay off your credit cards.

Step 4: Move on to the next largest debt

Keep paying the same amount ($290) each month until you pay off your first debt. Then move on the next debt on your list, which is the car loan.

This is where the snowball analogy comes in: You’ll pay the same $290 per month on the car loan plus the minimum payment on that loan, which is $150. So you’ll be paying $440 every month toward the car loan. 

By doing this, you’ll be able to completely pay off the car in seven months.

Step 5: Continue making your way through your debts

Continue taking the same payment you were using toward the smaller debt and applying it to the next debt until each of your debts is paid off in full. You’ll eventually be paying $440 plus $125 on your student loans, which equals $565 per month. 

With this high of a monthly payment, you’ll get your student loans paid off in one year and two months after starting.

Who should use the Debt Snowball Method 

The Debt Snowball Method could work well for someone who has a hard time with long term goals or planning. If you prefer to have motivation along the way, this debt repayment method can give that to you. 

It can help to cross off small debts from your list since it can help your overall debt feel less overwhelming. Overall, the Debt Snowball Method can help anyone who’s overwhelmed wade through their debts.

Opinions, advice, services, or other information or content expressed or contributed here by customers, users, or others, are those of the respective author(s) or contributor(s) and do not necessarily state or reflect those of Varo Bank, N.A. Member FDIC (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s).
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Tiffany Verbeck

Tiffany Verbeck

Tiffany Verbeck is a personal finance freelance writer and podcaster. You can find her full portfolio and the latest episodes of The Poor Me Podcast at

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