Debt Snowball Method
The debt snowball method pays off debts from smallest to largest balance, regardless of interest rate. Each paid-off debt frees up cash to accelerate the next — creating a growing 'snowball' of payments.
Created by personal-finance author Dave Ramsey, the snowball method prioritises psychological momentum over mathematical optimality. Seeing debts disappear quickly keeps people motivated.
Compared to the avalanche method (highest-rate first), the snowball typically costs more total interest but has a higher real-world completion rate because the early wins sustain motivation.
Research by Harvard Business Review found the snowball method led to more debt payoff than any other strategy in behavioural studies — suggesting psychology matters as much as maths for most people.
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Open calculator →Related terms
- Debt Avalanche Method
- The debt avalanche method pays off debts in order of highest interest rate first. It minimises total interest paid and is the mathematically optimal debt payoff strategy.
- Debt-to-Income Ratio (DTI)
- The debt-to-income (DTI) ratio is your monthly debt payments divided by your gross monthly income, expressed as a percentage. Most lenders require a DTI below 43% to qualify for a mortgage.
- Net Worth
- Net worth is the total value of everything you own (assets) minus everything you owe (liabilities). It is the most comprehensive single-number measure of financial health.