The snowball method: move from one paid-off debt to the next
With the snowball method, you pay off your smallest debt first. You continue to pay the agreed amounts on your other loans. As soon as one debt is cleared, you put the freed-up monthly amount towards the next one.
This way, the amount going towards one loan grows, while your total monthly budget for debts can stay the same.
How does the snowball method work?
- List your debts in order of the outstanding balance: smallest to largest.
- Continue to pay the agreed monthly instalment on every loan.
- Use any available extra money for the smallest debt.
- Once that is paid off? Add the freed-up monthly amount to the payment on the next debt.
- Repeat this as long as the amount fits within your budget.
You don't need to find more money every month. You are simply redistributing the amount you already used for debts.
An example with €400 per month
You have three loans. The agreed monthly amounts are €50, €100 and €150. In addition, you can spare an extra €100.
| Phase | To A | To B | To C | Total |
|---|---|---|---|---|
| A is the smallest debt | €150 | €100 | €150 | €400 |
| A is paid off | €0 | €250 | €150 | €400 |
| B is also paid off | €0 | €0 | €400 | €400 |
First, €150 goes to A: the regular €50 plus €100 extra. When A is finished, that full €150 rolls over to B. Combined with the regular €100, that becomes €250.
When B is also finished, the full €400 can go to C.
This example shows the distribution, not how long each phase lasts. That depends on the remaining balances and interest rates. In the final month of a loan, you only pay what is still required. Whether you can roll over the remainder that same month depends on processing and terms. The table shows the full months after such a transition.
Why can this help you keep going?
A paid-off loan is a clear result. You have fewer individual payments and see that your plan is progressing. This can motivate you to take the next step.
The method is particularly suitable if small, visible goals help you. It is no guarantee that paying off will become easy or that this order is the most financially advantageous.
Do you pay the least interest this way?
Not always. If the smallest debt has a low interest rate, a more expensive loan remains open longer. All other things being equal, paying off the highest interest first reduces interest costs more.
You can also carry over freed-up monthly amounts with that order. Therefore, distinguish between the order you choose and carrying over your payment budget.
What if you need the freed-up amount?
Finishing a loan also creates room in your monthly budget. You might need that space because your fixed costs have risen or your income has fallen.
In that case, adjust your plan. You don't have to carry over a freed-up amount completely if it means you cannot pay other bills. A lower payment budget does mean that your expected end date may shift.
Frequently asked questions
Can I do this without extra repayments at the start?
Yes. You can continue to pay the agreed instalments and then use the amount from the first completed loan for the next one. You just won't have that extra acceleration before that first loan is finished.
Do I have to arrange the rollover myself?
Assume so, unless your lender or payment institution demonstrably arranges this for you. Check your payments after each completed loan. A calculation on a website does not automatically change your bank transfers.
What if I get a new debt?
Add it to your overview and recalculate your plan. Also look at what caused the new debt. You may need to reserve more money for unexpected expenses.
Read more: When will you be debt-free? or start with the complete step-by-step plan.