Debt Management: The Debt Snowball Technique

Debt Snowball MethodCredit: Image from and Released for Use for Any Purpose with Attribution to redjarFinancial experts have talked about a technique known as the Snowball Technique. So what is this debt snowball method that people talk about? And how can it help you reduce your debt outstanding?

What Is Debt Snowball Method?

This is where you pay off the debt with the lowest balance first, and when the smallest balance is wiped out, gradually work your way up to the next smaller one and so forth. With the extra cash that comes from not having to pay your lowest debt, you redirect it to the next one, so that it gets reduced very quickly.

For example, John has an outstanding debt of:

Overall Balance Payable

(in order from lowest to highest)




Minimal Payment




Then, by the snowball method, he would first find all extra cash to pay more than the $15.00 minimum required for the debt with $600.55 balance while maintaining the minimum payment for the others.

After the first debt is wiped out, every month he would then redirect all that cash paid in for the first debt along with the second minimal debt payment, and concentrate on reducing that second debt with $9,000 in balance.  And so forth with the third payment.

Debt Snowball vs Debt Avalanche

What Is the Argument Against It?

The debt snowball plan is arguably not the most effective in reducing debt in the shortest time.

  • Mathematically, paying off your debt with the highest interest rate is more rational

Why Do People Still Pay via Snowball Debt Then?

It is psychology at work. Despite knowing that paying off the debt with the highest interest rate has proven to be more sound, some people just do not have the suitable temperament to go ahead with doing so.

The snowball debt plan allows you to quickly conquer the smallest outstanding debt, and to some people, the kick out of getting even one debt down is worth it. These people are smart, they understand themselves and what motivates them. Were they to pay off the debt with the largest interest, they would undeniable get frustrated and may just give up on what seems to be a mountain of debt piled up against them.

Understand yourself. In finance, this is probably the most useful service you can do to yourself. If after calculating, paying off the smallest balance appeal more to you, go ahead. Take pride in the knowledge that you know exactly what you want to do with your finance.