The "snowball method," simply put, means paying off the smallest of all your loans as quickly as possible. Once that debt is paid, you take the money you were putting toward that payment and roll it onto the next-smallest debt owed. Ideally, this process would continue until all accounts are paid off.

In fact, researchers for the Harvard Business Review found that the opposite approach, known as the snowball method, actually proved to be the most effective strategy. Popularized by “The Total Money Makeover” author Dave Ramsey, the snowball method prioritizes your smallest debts first, regardless of interest rate.

Debt Snowball Example The snowball method would have you focus on the car loan first because you owe the smallest amount of money on it. You'd settle it in about three months, then tackle the other two. As with the debt avalanche method, you'd become debt-free in about 11 months.

0:34 8:43 Debt Snowball Spreadsheet | Google Sheets | Instant Download - YouTube YouTube Start of suggested clip End of suggested clip The debt snowball method is a debt reduction strategy where you pay off debt in order of smallest toMoreThe debt snowball method is a debt reduction strategy where you pay off debt in order of smallest to largest gaining momentum as you knock out each remaining balance when the smallest debt is paid in

The "snowball method," simply put, means paying off the smallest of all your loans as quickly as possible. Once that debt is paid, you take the money you were putting toward that payment and roll it onto the next-smallest debt owed. Ideally, this process would continue until all accounts are paid off.

The debt snowball method's significant advantage is that it helps build motivation. Because you see fast results—eliminating some outstanding balances entirely in only a few months—it encourages you to stick with the plan.

P = Ai / (1 – (1 + i)-N) where: P = regular periodic payment. A = amount borrowed. i = periodic interest rate. N = total number of repayment periods.