Debt snowball method
Pay off your smallest debt first regardless of interest rate, then roll its payment into the next-smallest. Optimised for motivation.
The debt snowball method orders your debts by balance, smallest to largest, and attacks them in that order. You pay the minimum on every debt, then throw every extra dollar at the smallest balance. When it's paid off, you take everything you were paying on that debt and add it to the next-smallest. The "payment" grows like a snowball rolling downhill.
Mathematically, it's not optimal. Paying off a $500 credit card at 14% before tackling a $9,000 personal loan at 22% means paying more total interest. The avalanche method (highest interest rate first) saves more money on paper.
Snowball wins in practice for many people because it's optimised for psychology, not arithmetic. Closing out a debt entirely — watching an account zero — is a real motivational event. People who try avalanche and stall often finish snowball.
The right method is the one you actually complete. If you're highly motivated and good with spreadsheets, do avalanche. If you've tried and stalled before, snowball.
See also
- Debt avalanche method — Pay off your highest-interest-rate debt first regardless of balance. Mathematically optimal for minimising total interest paid.
- Minimum payment trap — Paying only the minimum on revolving debt keeps you in debt for years and triples or quadruples what you originally borrowed.
- APR (Annual Percentage Rate) — The yearly cost of borrowing money, expressed as a percentage and including most fees — not just the interest rate.
- Debt-to-income ratio (DTI) — Total monthly debt payments divided by gross monthly income. Lenders use it to decide whether you can afford more borrowing.
Ask Cashowa about debt snowball method
Apply this concept to your actual numbers — with verifiable math.