The debt snowball method prioritizes paying off the account with the smallest outstanding balance before moving up the chain of debt. Many financial advisors favor it because it promises the quickest results.
It earns its name because it harnesses the momentum of little payments to grow until you can take out big debt. Just like a snowball that grows bulkier as it rolls downhill, your debt payments increase in size as you move through your loans.
First, you must list all your outstanding unsecured debt that doesn’t include a mortgage. You’ll focus instead on any lines of credit, credit cards, or short-term personal loans.
Pick the account with the lowest balance as your focus and put your extra cash towards it on top of its monthly minimum. Stick with this step until you pay off this account.
Choose the next lowest balance. Now that you’ve paid off the first account, you can roll in what you put towards it (i.e., the extra cash and its monthly minimum) into the second smallest account.