Struggling to Repay Your Debt? The Snowball Method Could Help

In 2019, America’s collective household debt hit $13.86 trillion. That number, The Federal Reserve Bank of New York reports, marked the twentieth consecutive quarter with an increase in debt.

By some estimates, around 80% of American adults carry some form of debt. Whether it’s student loans, medical bills, car payments, credit cards or mortgages, to put it bluntly, the nation has got some bills to pay.

If you’re one of the millions of people currently in debt, it may feel like you have a formidable mountain to climb. However, according to financial experts, there is one way to make the journey to being debt-free a little bit easier. It’s known as the “snowball method,” and it’s meant to help people get into the habit of paying off their debts.

Here’s everything you need to know about the much-hyped financial strategy—and whether it’s right for you.

What is the snowball method, anyway?

The idea behind the debt snowball method is to sort your debts from the smallest balance to largest balance, says Matt Frankel, certified financial planner and personal finance expert at The Ascent. The one form of debt to exclude in your calculations, however, is your mortgage, as it’s typically considered a “good form of debt,” according to Frankel. That’s because it usually has a relatively low interest rate and is backed by an asset (your home) that should ideally appreciate in value over time.

Once organized, you can begin using the snowball method by paying off your smallest debts first.

“You make minimum payments on all but your smallest balance. You pay as much as possible toward the smallest debt to pay it off in full as soon as possible,” Frankel says. “The idea is that paying off your smaller debts faster will help you build momentum, and the amounts you can pay toward your larger debts will grow over time.”

It might also help to picture the snowball method in a more visual way, says Sara Rathner, NerdWallet’s credit cards expert.

“Think of it like a snowball rolling down a hill, getting larger as it moves forward. You start with small actions, and over time, they make a big difference,” she says.

Who is a prime candidate for the snowball method?

The snowball method, both Frankel and Rathner say, is best suited for people with “typical” debt profiles. That means relatively small credit card balances, which often have high interest rates, and larger balances on auto loans or student loans, which typically have lower interest rates. It could also be a viable option for those who have multiple debts — such as credit card debt, medical bills, student loans and a mortgage — and just need a place to start.

“It also makes sense for people who have a few small debts they can pay off first to build momentum,” Frankel says. A good candidate for the snowball method, he explains, might have three credit cards with balances of $200, $500, and $2,000, with an average interest rate of 19.24%, as well as a $5,000 auto loan balance with an average interest rate of 4.21%, and $20,000 in student loans with an average interest rate of 4.45%. That person would pay off those $200, $500, and $2,000 credit card balances first before working their way toward the loans.

The snowball method is meant as a habit-building tool for people who find their debt burden psychologically overwhelming. “The debt snowball method is right for people who need some behavioral help and motivation to get out of debt,” Nick Holeman, a senior financial planner at Betterment, tells TIME.

It’s all about those small victories that help keep the momentum going, Rathner adds. “If you struggle with staying motivated and little wins make you excited to keep moving forward and crossing debts off your list, the snowball method can help,” she says.

Holeman contends that, behaviorally speaking, the debt snowball method is a good option “because it is easier to see your progress and gain momentum when you start with the smallest debts. You often hear coaches or CEOs say ‘look for quick wins to gain some momentum.’ That is exactly what you are doing with the debt snowball method.”

And if you do opt for the snowball method as your repayment plan, it’s generally wise to keep to it for the long haul. “Many times, the best strategy is the one you stick with the longest,” Holeman says.

But the debt snowball method isn’t a magic bullet for everyone

For most people, their smaller debts tend to be high-interest credit cards, Frankel says, while their larger balances tend to be lower-interest auto loans or student loans, meaning the snowball method naturally prioritizes high-interest debt. But that won’t always be the case. While the snowball method can be an effective psychological tool, it may make more financial sense to pay off your debts with larger interest rates regardless of their overall size before tackling your low-interest debt. Depending on your personal financial situation, that may mean you wind up paying less in interest over time.

“There is one area where I often disagree with the traditional snowball method,” Frankel says. “If someone has $15,000 of credit card debt at 20% interest and a $14,000 car loan balance at 4%, it’s tough to make a case that the car loan should be paid off first, even though the snowball method says it should be.”

Not sure if the snowball method makes sense for you? Take a look at your financial situation and compare what would happen over time if you try the snowball method versus prioritizing your high-interest debt.

“A good analogy is trying to fill a leaky bucket,” Holeman says. “The bigger the leak, the longer it will take to fill up the bucket. And the higher the interest rate, the longer it will take to get out of debt. The debt snowball method doesn’t take this into account.”

Who should avoid the snowball method?

The snowball method is not ideal for people whose high-interest debts are large compared to their lower-interest debts, both Frankel and Rathner say.

“The snowball method is likely a bad choice for someone who has credit card debt that is larger than their auto loan balance,” Frankel says as an example.

Once you’ve paid off your debts, how can you stay debt-free?

“It’s unrealistic to expect a straight, easy path to freedom from debt,” Frankel says. “Life happens, and an unforeseen emergency expense can easily interrupt your progress.” The best thing to do, he says, is to pick up where you left off as soon as it’s practical to do so and resume paying your smallest debt until it’s gone.

Above all else, the most important thing is to not be discouraged or give up. And if you do pay off your debts, it’s critical to avoid the pitfalls that come with a debt-free life. For instance: avoid seeing “the absence of debt as an excuse to start living above your means,” Frankel says.

“Continue using just as much money as you had been using to pay down debt — but instead of putting it toward credit card and loan bills, put it into savings or investments,” Frankel suggests. “You’ll be forced to stay disciplined when it comes to your spending, and you’ll also be setting yourself up for an even brighter financial future.”

And when it comes to your finances, Rathner says, you have to look out for yourself first.

“Unfortunately, many people get into debt helping loved ones financially,” she says. “Don’t co-sign a loan or lend money when you don’t have the funds to spare.”

Instead, try helping your loved one by setting up a budget for them and helping them get their own debt snowball rolling, Rathner suggests. If they are really in a pinch and need extra cash, make sure to allocate it and add it to your own budget as you would with any other bill. This way, you’ll both be a little more financially responsible.