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  • Writer's pictureJames Heinz

Debt Repayment Methods: Debt Snowball Method for Paying Off Debt

Are you drowning in debt? Do you feel overwhelmed by multiple loans, credit card balances, and bills? If so, you're not alone. Many Americans struggle with debt, and it can feel like a never-ending cycle of minimum payments and accruing interest. 

However, a strategy among various debt repayment methods has helped countless individuals take control of their finances and become debt-free: the Debt Snowball Method.

What is the Debt Snowball Method?

Debt Snowball Method
Debt Snowball Method

The Debt Snowball Method is a simple yet effective approach to paying off debt. It involves listing all your debts from smallest to largest balance. You then focus on paying off the smallest debt first while making minimum payments on the others.

Feeling unsure about organizing your debts or calculating payments? Shepherd Outsourcing offers personalized debt management plans to help you start your journey toward freedom from debt!

Why Choose the debt repayment methods?

  • It provides quick wins by knocking out smaller debts first, boosting motivation

  • Small victories create psychological momentum, encouraging you to keep going

  • Initial successes build self-belief that you can achieve debt freedom. Confidence replaces the hopelessness that often plagues debtors

  • The Snowball Method celebrates small wins compared to the Debt Avalanche Method, which prioritizes high-interest debts

Hang tight, we're about to discuss how the Debt Snowball Method can turn the tide in your battle against debt.

How Does the Debt Snowball Method Work?

  • Step 1: Make a list of all your debts, from smallest to largest balance

  • Step 2: Calculate your total monthly income and determine how much extra you can pay toward the smallest debt

  • Step 3: Create a budget to free up more money for debt repayment while avoiding new debt to ensure progress isn't derailed

  • Step 4: Pay the minimum on all debts except the smallest

  • Step 5: Throw all extra money at the smallest debt until it's paid off

  • Step 6: Once the smallest debt is gone, roll that payment to the next smallest debt

  • Step 7: Repeat until all debts are paid in full

Let's look at an example:

  • Credit Card 1: $2,000 balance

  • Personal Loan: $5,000 balance

  • Student Loan: $15,000 balance

Using the Debt Snowball Method, you'd focus on the $2,000 credit card first. Once that's paid off, you'd roll that payment to the $5,000 personal loan, and so on.

The psychological effect of paying off smaller debts first is powerful. Each debt you eliminate feels like a victory, motivating you to keep going. As the Snowball grows, you'll gain momentum and confidence.

Benefits of the Debt Snowball Method

  • Simple to understand and implement

  • Each debt paid off is a milestone worth celebrating. These small wins nurture a positive mindset to tackle remaining debt

  • Seeing debts disappear one by one can be incredibly satisfying

Now, before we get carried away, it's only fair we discuss some potential bumps you might encounter on this debt-free journey.

Need a motivational boost or personalized advice as you tackle your debt? Our experts at Shepherd Outsourcing are skilled in offering tailored debt payment methods and the support needed to see your debt reduction plan through!

Potential Drawbacks

While the Debt Snowball Method provides benefits, it's important to understand its potential drawbacks - most notably, the likelihood of paying more interest charges over time compared to other debt repayment methods. 

The fundamental issue stems from the method's approach of prioritizing the smallest debts first, regardless of their interest rates. 

  • High-interest debts remain longer - Since high-interest debts like credit cards are often not prioritized early on, they continue accruing interest charges for longer periods.

  • Smaller interest rate debts get overpaid - Within the context of the Debt Snowball Method, devoting extra payments to low-APR loans before higher-APR debts means you might end up paying more in total interest across all debts compared to debt payment methods that prioritize high-interest debts

  • Overall repayment takes longer - By not attacking the highest interest rates first, the total payoff period for all debts can be extended by months or years.

  • Interest rate differential is key - The larger the gaps between your highest and lowest interest rates, the more expensive the Snowball Method becomes over time.

To illustrate with an example:

  • Credit Card at 18% APR with $5,000 balance

  • Personal Loan at 8% APR with $10,000 balance

Using Snowball, you'd pay off the smaller $5,000 balance first. But the $10,000 personal loan would accrue much less interest if prioritized early instead.

However, the interest rate "penalty" has to be weighed against the Snowball's motivational advantages. For some, the added interest cost is worth gaining the psychological momentum to ultimately become debt-free. Others may prefer minimizing interest by using the Avalanche approach.

The "right" method depends on your financial situation and personal tendencies. If higher interest rates are manageable and motivation is your biggest struggle, the Debt Snowball can be a powerful tool despite its potential interest costs.

Alright, let's not get discouraged by the hurdles; instead, here's how we can cleverly navigate through them.

Common Challenges and Solutions

It's important to recognize that every individual's debt situation is unique. The challenges faced and debt payment methods required may differ based on personal circumstances, financial obligations, and psychological factors. 

However, some common hurdles can arise when implementing this approach:

  • Initial frustration due to focusing on small debts instead of high-interest rates

Solution: Visualize your debt payoff progress through charts or apps to stay motivated. Adjust your budget to maximize debt payments without feeling overly deprived

  • Difficulty sticking to a tight budget

Solution: Build reasonable accommodations for small indulgences. Finding a balance between austerity and quality of life is key

The path to becoming debt-free is rarely linear. It's common to encounter setbacks or plateaus that test your resolve. The key is anticipating potential roadblocks and having contingency plans to overcome them. Don't be afraid to adapt strategies as your situation evolves.

Overcoming debt is a journey - embrace patience, flexibility, and self-compassion along the way.

Alternatives and Complementary Strategies

debt repayment methods
debt repayment methods

The Debt Avalanche Method is the principal alternative to the Debt Snowball approach. Rather than prioritizing the smallest balances, it focuses on paying off the highest interest-rate debts first, potentially saving more on interest over time.

  • Interest savings - By tackling high-APR debts early, you minimize accruing additional interest charges over the payoff period

  • Mathematically optimal - For those seeking to get out of debt in the most cost-efficient way, the Avalanche Method tends to produce the lowest total interest paid

  • Potential for lower motivation - Some individuals may struggle to maintain momentum without small, frequent wins, especially early on

  • Requires discipline - Sticking with this strategy despite needing to see balances eliminated right away demands commitment

The Avalanche Method works best for those who can stay motivated without small psychological victories. The interest savings can be substantial for those with debts with varying interest rates.

Debt consolidation can be a powerful complement or alternative to the Snowball and Avalanche debt repayment methods, provided the new loan terms are favorable and the borrower commits to not accruing additional debt. It involves combining multiple debts into a new single loan, ideally with better terms.

  • Simplifies payments - You have just one new consolidated payment instead of juggling many minimum payments

  • Potentially lower interest rates - Debt consolidation loans frequently offer lower rates than credit cards and other existing debts.

  • Frees up cash flow - With a lower payment and rate, you have more funds available to pay extra toward the consolidated balance.

  • Doesn't address habits - While it restarts your debt clock, consolidation alone does not solve spending and budgeting issues that created the original debt.

Consolidating before using the Snowball Method can accelerate debt payoff progress. The Avalanche approach can start with consolidating high-interest debts into one new loan.

Considering debt consolidation as a step towards debt freedom? Shepherd Outsourcing could help you understand your options and facilitate a consolidation plan that makes sense for you!

Having a dedicated emergency fund is critical when paying down debt to prevent derailing your progress with new debt taken on due to an unexpected expense.

  • Saves you from new debt - With cash reserves, you can handle emergencies like car repairs or medical bills without borrowing

  • Provides peace of mind - Knowing you have a cushion reduces money stress and anxiety when paying off debt

  • Determines emergency need - Most experts recommend saving 3-6 months' living expenses for an adequate emergency fund. Note that the ideal size can vary based on your job stability, household income, and whether you have dependents

  • Start small if necessary - Even building a $1,000 starter emergency fund puts a buffer between you and new debt

An emergency fund complements both the Snowball and Avalanche debt repayment methods by preventing new debt accumulation during the payoff process. This keeps you moving forward consistently.

Understanding these alternative strategies and debt repayment methods allows you to build a personalized debt payoff plan optimized for your financial circumstances and psychological needs.


Paying off debt can be a challenging task, but the Debt Snowball Method provides a simple, motivational approach compared to other debt repayment methods. You can take control of your finances and achieve the freedom of becoming debt-free by celebrating small wins and building momentum. 

Choose a strategy that fits your motivation and goals, and stick with it. The journey may be challenging, but the reward of financial freedom is worth it.

Remember, whether you choose the Snowball Method, the Avalanche Method, or debt consolidation, Shepherd Outsourcing can support your journey with personalized debt management plans and guidance, making your path to financial freedom clearer. Book your free personal consultation now!

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