The debt snowball is a debt reduction strategy that involves paying off debts in order of smallest to largest, regardless of the interest rates. The idea is to focus on paying off smaller debts first, which can create a sense of momentum and motivation to continue paying off larger debts.
As each small debt is paid off, the money that was being used for that debt can be applied to the next smallest debt, leading to a “snowball” effect of paying off larger and larger debts.
The debt snowball method typically involves making minimum payments on all debts except for the smallest one, which is paid off as quickly as possible. Once the smallest debt is paid off, the money that was being used to pay off that debt is then redirected to the next smallest debt, and so on.
By the time the largest debt is reached, the debtor will have freed up a substantial amount of money to apply toward that debt, leading to a quicker payoff.
The debt snowball method is popular because it provides a sense of accomplishment and progress as debts are paid off, which can help to keep the debtor motivated and committed to the debt reduction process.