The debt snowball method is a debt reduction strategy where you pay off your debts in order of smallest to largest balance. As you pay off each debt, you roll the payment you were making on that debt into the next smallest debt, creating a "snowball" effect.
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There are two popular methods for paying off debt: the Debt Snowball Method and the Debt Avalanche Method. Each has its own advantages and considerations. Let's examine both.
The debt snowball method is a debt reduction strategy where you pay off your debts in order of smallest to largest balance. As you pay off each debt, you roll the payment you were making on that debt into the next smallest debt, creating a "snowball" effect.
1. List all your debts from smallest to largest balance
2. Make minimum payments on all debts except the smallest
3. Put as much extra money as possible toward the smallest debt
4. Once the smallest debt is paid off, add its payment to the next smallest debt
5. Repeat until all debts are paid off
• Quick wins provide motivation to continue
• Simpler to track progress
• Builds momentum as you pay off each debt
• May pay more in interest compared to the avalanche method
• Psychological benefits can outweigh financial costs
• Works best when combined with a budget and emergency fund
• Create a realistic budget to find extra money for debt payments
• Consider increasing your income through side jobs or selling items
• Stay motivated by tracking your progress
• Celebrate each debt payoff milestone
The debt avalanche method is a debt reduction strategy where you pay off your debts in order of highest to lowest interest rate. This method minimizes the total interest paid over time, potentially saving you money compared to other strategies.
1. List all your debts from highest to lowest interest rate
2. Make minimum payments on all debts except the highest interest rate
3. Put as much extra money as possible toward the highest interest debt
4. Once the highest interest debt is paid off, add its payment to the next highest interest debt
5. Repeat until all debts are paid off
• Saves money on interest payments
• More mathematically efficient
• Faster overall debt elimination
• May take longer to see first debt eliminated
• Requires strong discipline and patience
• Works best for those motivated by long-term financial benefits
• Use a debt payoff calculator to track progress
• Focus on the long-term savings in interest
• Set smaller milestones to stay motivated
• Consider refinancing high-interest debts if possible
By making additional payments, and using the Lowest Balance method, you will pay $ 22 less in interest and payoff your loans 4 months early.
Toggle between table or summary views and payoff methods (snowball or avalanche) to see your debt payoff plan. The table view is great to see each month's payment, interest, principal and remaining balance. The card view shows a summary of each debt's end results of being paid off with extra payments and the chosen payoff method.
Toggle between table or summary views and payoff methods (snowball or avalanche) to see your debt payoff plan.
We've summarized the results for each debt below showing the order of payoff and specific savings from making additional payments.
Additional payments will save $ 21.10 in interest on this debt account and you'll pay it off 4 months earlier.
