Credit Management

What is the Debt Snowball Method?

The debt snowball is a tried and true strategy to pay down personal debt. Prosper’s got the lowdown on how to use this for your benefit!

Man applies debt snowball strategy to his finances

When paying down debt, it’s often helpful to develop a strategy that aligns with your financial goals and habits. There are several common strategies to address personal debt, but one of the most well-known is the debt snowball strategy. Here’s a look at this common debt payment strategy, how it works, and how it might help you pay down your debt and achieve financial empowerment! 

The Snowball Debt Plan

The debt snowball strategy focuses on building momentum and motivation by generating tangible results early in the process. You focus on paying down your smallest debt first, then move on to the next-smallest debt, and pay each debt down to zero before tackling the next debt. 


You still, of course, make the minimum payment each month on all your debts. Simply focus your debt payments above the minimum on the loan with the smallest balance each month. As you pay down each debt, it creates a ‘snowball’ effect and generates victories by paying off loans. 

Each loan paid off is a win, which is a powerful motivator for many consumers.

Step-by-Step: Using the Debt Snowball Strategy

Build a monthly budget: We find the budget binder method works well in combination with this strategy, as it allows you to keep your debt balances in one place and makes it easy to track where you should be allocating your debt payment funds. Determine your minimum payments, then establish the amount you can pay toward your debts each month:

List And Sort Debts: Create a list of your debts with balances, sorting from smallest to largest balance. Each month, your debt payment budget will be paid to the top loan on your list. 

Payoff, Reallocate, Repeat: After the loan with the smallest balance has been paid off, celebrate and then move on to the following loan. 

Become Debt-Free: Keep paying off loans until you’re debt-free! 

Debt Snowball Pros

The debt snowball gives a psychological edge to consumers that might otherwise get frustrated and give up. How?  If not instant gratification, it provides at least quicker gratification than might occur with other debt management strategies. 

Paying off debt can feel like a slog at first. It can take years, and it’s easy to just give up and let interest pile up. It’s easy to feel like all this money you’re spending on paying off your debt is wasted when you never seem to get anywhere. 

However, when you pay off a couple of debts early in the process, it provides tangible results and a motivational boost to those using this strategy. It also lowers stress and makes it easier to stay committed to the process, since you’ve got a set strategy and don’t have to agonize over what to pay first. 

Debt Snowball Cons

The disadvantage of the debt snowball strategy is that it isn’t the optimal method to use if you want to pay off your debt with the minimum amount of interest. 

The avalanche strategy, another popular debt repayment method, focuses on paying down one debt at a time, similar to the snowball strategy. However, the avalanche strategy focuses on paying down the debt with the highest interest rate first. This method reduces the overall interest you’ll pay versus using the snowball strategy, all other factors being equal. Because someone using the avalanche strategy will typically pay less overall in interest over the course of paying off their debts than someone using the snowball strategy, they will pay their debt off faster, assuming the same debts and interest rates. 

The Best Of Both Worlds: Debt Relief That Works For You

Of course, the best debt payoff strategy is the one that works best for you. However, both strategies require a commitment to staying the course. For some consumers, the debt snowball method works best, as they need the motivation of having smaller wins along the way, especially early in the process. Other consumers might prefer the avalanche method, focusing on the long-term and forgoing the confidence and motivation boosts from those early wins. It just depends on your financial personality!

It’s even possible to adopt a hybrid approach. For example, you can list your debts from smallest to largest as in a debt snowball strategy and then list the interest rates of each loan. Then order which debts you’ll pay off based on a combination of balance and interest rate. But, again, the important thing is having a plan and sticking to it. 

No matter what strategy you use, be careful not to run the balance back up on your cards or revolving loans after you pay them off.  It can be a good idea to keep an account open after paying it off for the potential credit score boost, but you don’t want to do all this work just to pay them all down again!

Debt Snowball: Is It For You? 

When deciding on a debt payoff strategy, be realistic about your budget and ability to stick to the plan. A debt payoff strategy that’s easy for you to stick to is better than one that you won’t be able to follow. Even though you might pay a little more in interest, the debt snowball plan may be worth it if it helps you keep working toward your goals. Don’t underestimate the power of reinforcement and achieving goals! 


Whichever method you pick, the key is sticking to it and chipping away at your debt. It might be challenging, and it may seem like the end is out of reach, but being debt-free is an excellent hallmark of financial empowerment. You can do it! 

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