Jan 11

How to snowball debts – the cheapest way to pay them off

Reading Time: 4 mins

The quickest and cheapest way to get your loans paid is to snowball debts.

Snowballing debts means you’re paying them off by starting with the most expensive – not the one you owe the most to, but the one with the highest APR (Annual Percentage Rate).

Once you’ve paid that one off, you then move down the list doing the same to the next most expensive, and the next.

Each time you pay a whole one off, the more money you gather to throw at the lower ones – just like a rolling snowball!

Here’s how to do it.



How to snowball debts

Snowballing debts is the quickest and cheapest way to do it.

However, it doesn’t look like it when you first learn about it.

Trust us though, it’s definitely the best way if you can do it.


Snowball debts step by step

How to snowball debts - the cheapest way to pay them offStep 1: Move as many of your expensive credit and store card debts as possible to 0% credit cards. These are cards which cost nothing for a few months, i.e. they don’t charge you any interest. Get one here.

Step 2: If you can’t get actual 0% cards, try for low balance transfer cards so that you can at least get the debts down as cheap as possible. You can get those here too.

Step 3: It’s also possible to consolidate at least some of your debts into one cheaper loan, but make sure it’s an UNSECURED loan rather than a secured loan. The ‘secured’ loans tend to be secured on your home or your car and it’s really not worth putting those at risk for your debts. However, check the comparison here to see if you can get an unsecured loan that’s cheaper than your other debts.

Step 4: When you can’t switch your debts to a cheaper rate, make a list of them from the most expensive one (that is, the highest interest rate or APR) downwards. It doesn’t matter what the size of the debt is on each card or loan, just the interest rate.

Step 5: Pay as much as you can of the top one each month, while only paying the minimum amount on all the others. So, in other words, pay off the bare minimum that you legally have to do with your loans and credit cards except for the most expensive one into which you throw as much money as you can spare every month.

Step 6: Once the top one has been paid off, do the same to the next most expensive debt, still paying the minimum on the others.

Step 7: Once the next most expensive one has been paid off, do the same to the third one. Are you seeing the pattern here?

If all goes to plan, once you have paid off the first most expensive one you will have more money to throw at the second one, and so on down the list, so it should get quicker to pay off each debt as you get rid of the top ones.

When it comes to the fourth on your list you should have loads of money to pay it off so that will happen really quickly!


How do other people snowball debts?

A lot of people have paid off their outstanding debts by snowballing them (including me!). Once you get the idea it’s pretty straightforward.


examples of  snowball lists

Example 1

Kate has £15,600 of debt across two credit cards, a loan and a store card.

Debt Amount owed Interest rate Minimum payment
Store card £600 29% £180
Credit card 1
£1,000 22% £50
Credit card 2 £8,000 17%
Loan £6,000 12% £300

Right now, Kate spends £1,000 a month trying to pay off her debts. Sticking with the status quo will cost her £1,831 in interest until they are paid off.

To snowball, she should pay the minimum (£500) on the credit cards and loan and pay the remaining £500 each month on the store card.

At that rate, the horribly expensive store card will be paid off in two months.

Once it’s paid off, she can do the same with the credit cards – 1-2 in that order – then finally the loan (if she’s allowed to pay it off quickly). That way, she will have them all paid off in 18 months with only £1,593 of interest, saving herself £238.


Example 2

Dale has £40,000 of debt spread across a loan and a bank overdraft.

Debt Amount owed Interest rate Minimum payment
Overdraft £15,000 13% 0
£25,000 7% £750

Dale has been concentrating all his efforts on clearing the loan, paying £1,500 off a month. But that approach will cost him £5,507 in interest.

If he got rid of the more expensive overdraft first, he would get the lot cleared in 30 months and pay a total of £4,268, saving £1,239 in interest.


Are you struggling with debt and need some support?

Sign up to our regular debt emails here which will support and encourage you as you pay them off and start to get rich!

Tell us how much you’ve paid off so far in the comments below. It will give others encouragement 🙂



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