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The snowball method: reduce your debt

Learn how to reduce your debt using the snowball method. Discover its benefits, how to implement it, and the risks involved. Regain control of your finances today.

11 April 2023Helen Tippell 2 min read
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If you’re feeling anxious about mounting debt, the snowball method can help you feel more in control.

The snowball method is a debt reduction strategy that involves focusing on paying off your smallest debts first while continuing to make minimum payments on all your other debts.

Once the smallest debt is paid off, you take the money you were using to pay off that debt and apply it to your next smallest debt.

There are a few steps to it.

Step 1

The first step is to gather all your debt information, including the balance owed, the interest rate, and the minimum monthly payment.

Then, make a list of your debts in order of smallest to largest balances.

Head to your report to see your loans, credit cards, and current accounts all in one place.

Step 2

Next, focus on paying off the smallest balance first, while making minimum payments on all your other debts.

To do this, you'll need to work out what you can afford to pay towards the debt. That might mean cutting back on expenses or negotiating with lenders for a lower interest rate.

Step 3

Once you've paid off your smallest debt, move on to the next smallest debt, and use the amount you were paying towards your first debt to pay down the second one. Keep repeating this process until you've paid off all your debts.

Check your report to see when your credit cards or loans have been closed.

The snowball method has several benefits. Here are a few.

  • It creates momentum. Paying off small debts first gives you a sense of accomplishment and motivation to keep going. As you see progress, you'll be more motivated to keep up the momentum.
  • It's easy to understand. The snowball method is easy to understand and implement. It doesn't require any advanced financial knowledge, and you can start right away.
  • It can improve your credit score. As you pay off your debts, your credit score should steadily improve. This could help you qualify for lower interest rates and better credit terms in the future.

The snowball method does come with a few risks that you need to be aware of.

  • It may take longer to pay off all your debts. Because you're focusing on paying off the smallest debts first, it may take longer to pay off your larger debts.
  • It may not be the most cost-effective method. It doesn't take into account the interest rate on your debts. Paying off your highest interest rate debt first may save you more money in the long run (that’s called the avalanche method).

The snowball method is a simple and effective way to tackle your debt. By focusing on paying off your smallest debts first, you can build momentum and regain control over your finances. Just remember that there are some risks involved, so be sure to do your research and choose the debt reduction method that works best for you.

If you need help making a budget, try out StepChange’s guide. StepChange helps people with debt every day. Find out how they can help with your debt in just a few minutes. Take the money health check online.

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Written by Helen Tippell

Digital Copywriter

Helen's our resident Digital Copywriter. She makes personal finance easier to understand so you can be confident about your credit choices.