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Snowball Method For Debt – Complete Guide

snowball payment

For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.

The snowball method is by far my favourite method of getting out of debt. It’s super simple to follow and very motivating as you make quick progress.

Opinions are divided as to whether the Snowball Method is the most effective strategy you can use because the strategy results in you paying more overall to clear your debts. Using this strategy also means that you will take longer to clear your debts.

However, there is evidence that suggests that despite its flaws, the Snowball Method achieves better results than some other debt clearance strategies manage to achieve.

snowball debt method

What Is the Snowball Method?

The Snowball Method is designed for people who have multiple debts. The idea is that once you have paid the minimum repayment on each debt, if there is any spare money you should use that towards the clearing smallest debt rather than using it towards clearing the debt with the highest interest.

As an example, let’s say you have three credit cards:

  • Credit Card 1: £100 outstanding, £5 minimum monthly repayment, 10% interest
  • Credit Card 2: £200 outstanding, £10 minimum monthly repayment, 20% interest
  • Credit Card 3: £500 outstanding, £25 minimum monthly repayment,  30% interest

Let’s also say that you have £50 per month that you can use towards debt repayment. You need £40 to cover the minimum monthly repayments across all three of your credit cards which leaves you with an extra £10 that you can use towards clearing your debt.

Arguably, you should use that £10 to reduce the outstanding balance on Credit Card 3 as that’s the credit card with the highest interest rate. But that’s not how the Snowball Method works.

The Snowball Method says that you should pay that extra £10 towards clearing Credit Card 1 until Credit Card 1’s balance had been paid off completely. In other words, you’d be paying £15 each month rather than the £5 minimum monthly payment.

Once Credit Card 1 has been completely paid off, you would have £15 spare so you would increase your monthly payment on Credit Card 2 to £25 until Credit Card 2 had been paid off completely.

You would only start to make more than the minimum monthly repayment on Credit Card 3 once the balances on both Credit Card 1 and Credit Card 2 had been completely cleared.

The reason that this method is called the Snowball Method is due to the fact that the monthly repayment on the smallest debt increases over time, in the same way that a snowball grows if you roll it in snow.

Who Is The Snowball Method Suitable For?

The Snowball Method is an early intervention debt management strategy. It is ideal if you have realised that your debts have started to get out of control but they haven’t actually got to the point where you are unable to make the minimum repayments each month.

The Snowball Method can only be used to clear your debts if you are able to make additional repayments towards your debts each month. If all of your debts have fixed monthly repayments the Snowball Method cannot be used. If your lenders charge fees if you clear your debts early, that could also mean that the Snowball Method isn’t suitable.

The Downside of the Snowball Method

The problem with the Snowball method is that because you aren’t paying off the debts with the highest rates of interest, you will end up paying more interest over your repayment period than you would have paid had you repaid those high-interest debts first.

Because the interest on the high-interest debts is being added to the outstanding amount each month, this also means that it will also take you longer to completely repay your debts.

In other words, from a purely mathematical point of view, it would appear that the Snowball Method makes absolutely no sense.

In addition, because it is not a formal arrangement, it does require willpower. It can be tempting to use any surplus money to treat yourself rather than to make an additional repayment towards your smallest debt. Obviously if you do this, the Snowball Method won’t work and your debts will take much longer to clear.

But studies from the likes of Northwestern’s Kellogg School of Management and the Harvard Business School have shown that actually, the Snowball Method does appear to be one of the more effective debt clearance strategies.

So Why Does It Work?

The main difference between the Snowball Method and other debt clearance strategies is the fact that the Snowball Method gives you regular, achievable targets to hit.

In the credit card example above, if we ignore the interest that will be applied each month it would take 16 months to clear the debt (£800 divided by £50). But during those 16 months you will be paying off three separate credits cards each month. For some people that can be soul destroying.

By concentrating on the smaller debt first, your first credit card is cleared by the seventh month. That feels like an important milestone and leaves you with just two debts remaining.

Because you can now increase the repayments that you are making towards your second credit card debt, that debt will be cleared six months later. Two down, one to go. Another morale boost.

At that point, you’ll be paying twice as much towards your final credit card’s outstanding balance, so you’ll see that outstanding balance falling a lot more quickly than you would had you only been paying £25 each month. Again, this is a boost to your morale. You can see the progress that you are making. It feels like you are on the final lap and for many people, that encourages them to finish their debt repayment plan.

What Effect Does The Snowball Method Have on Your Credit Score?

The Snowball Method is a completely private matter. It is not a form of insolvency and as such, the Insolvency Service does not need to be involved. Even your lenders won’t know that you are using the Snowball Method to clear your debts.

As such, provided you continue at least making the minimum payments towards each of your debts each month, using the Snowball Method to clear those debts will have no impact on your credit score.


Are you struggling with debt?
Are you struggling with debt?
  • Affordable repayments
  • Reduce pressure from people you owe money to
  • Stop interest and charges from soaring