The Snowball Method


The snowball effect refers to the way a snowball rolls down a hill gaining momentum as it goes. The general gist is that it starts off small but as it rolls down the hill, it gathers more snow and increases in size. While this can be applied to a variety of things, when applied to debt repayment, the snowball method refers to a system to help people repay their debts in a structured way by focusing on one debt at a time.

The first thing to do is to write down all debts that you have including their amounts, minimum payments, interest rates and any special rates or fixed-term deals you have. Once you have this, you need to decide whether you want to focus on reducing the number of debts or how much interest you’re paying, as there are two options depending on your focus. The version you choose depends entirely on you and your motivations. Some people might find the ‘quick wins’ of paying off their smaller debts first as motivation to keep going on the other debts, whereas others may be focused on wanting to repay as little interest as possible but are already quite disciplined in making the repayments.

The basics

The idea of both of these methods is to focus on making the minimum payments on all debts apart from one. This one becomes the focus and any extra cash is used to make overpayments on this until it is paid off. Once the first one is done, the payments towards the first debt can then be rolled over to the next and so on until all debt is repaid.

The snowball method

This method focuses on the smallest debt first, the idea is to continue making the minimum repayments on all of the larger debts and focus on overpaying only the smallest debt. Once the smallest one has been paid off, you can roll the same amount onto the next smallest debt and do the same thing again and so on until all of your debts have been repaid. With this method, you may see quicker results, though you may end up paying more interest.

The avalanche method

Similar to the snowball method, the avalanche method still focuses on one debt at a time but prioritising the highest interest rate debt first. Again only paying the minimum on other debts until the highest interest debt is repaid and then moving onto the next highest. This version will mean you should pay less interest overall though it may take you longer to see results.
Whichever method you choose, there are some things to bear in mind:

  • Any fixed term offers such as 0% periods
  • Any overpayment fees charged by lenders
  • Any changes to your financial situation
  • Your own personal motivations

The methods detailed in this article may not be suitable for everyone’s situation. If you are struggling with your debts, you can also speak to Stepchange who offer free-impartial debt advice.