Question 1

Month 1:

Accepted Answer

The borrower pays the $60 minimum on the Credit Card and the $200 minimum on the Auto Loan.
They attack the Medical Bill. Payment = $50 (minimum) + $150 (extra snowball) = $200.
Medical Bill Math: $500 + $0 interest - $200 payment = $300 new balance.
Credit Card Math: Monthly interest is $2,000 × (0.24 / 12) = $40. $2,000 + $40 interest - $60 payment = $1,980 new balance.
Auto Loan Math: Monthly interest is $10,000 × (0.06 / 12) = $50. $10,000 + $50 interest - $200 payment = $9,850 new balance.

Question 2

Month 2:

Accepted Answer

The borrower repeats the process.
Medical Bill Math: $300 + $0 interest - $200 payment = $100 new balance.

Question 3

Month 3:

Accepted Answer

The borrower only owes $100 on the Medical Bill. They pay the $100, completely eliminating Debt 1. They have $100 left over from their $200 dedicated amount for that debt. This $100 immediately rolls over to the Credit Card.
Credit Card Math: Previous balance was roughly $1,939. The new payment is $60 (minimum) + $100 (rolled over) = $160.

Question 4

Month 4 and Beyond:

Accepted Answer

The Medical Bill is gone. The borrower now has $260 total to attack the Credit Card ($60 original minimum + $50 old medical minimum + $150 extra snowball). They will pay $260 every month toward the Credit Card until it is gone. Once the Credit Card hits zero, that entire $260 rolls over to the Auto Loan, meaning the borrower will start paying $460 per month ($200 auto minimum + $260 rolled over) toward the car until they are completely debt-free.

Question 5

Debt Snowball vs. Debt Avalanche:

Accepted Answer

As previously noted, the avalanche method targets the highest interest rate first. Mathematically, the avalanche is undeniably superior. If a borrower has $50,000 of debt spread across various rates, the avalanche method will always cost less in total interest and result in an earlier debt-free date than the snowball method. However, studies consistently show that the snowball method has a higher completion rate. The avalanche is best for highly analytical, disciplined individuals who are motivated by spreadsheets; the snowball is best for the vast majority of the population who need emotional reinforcement to stay on track.

Question 6

Debt Snowball vs. Debt Consolidation:

Accepted Answer

Debt consolidation involves taking out a single, large new loan at a lower interest rate to pay off multiple smaller, high-interest debts. The appeal is clear: it simplifies five monthly payments into one, and the lower APR saves money. However, consolidation treats the symptom, not the disease. The borrower has not actually paid off any debt; they have merely moved it from one ledger to another. Statistically, a significant percentage of borrowers who consolidate their credit cards end up running the balances back up on the original cards because they never changed their underlying spending behaviors. The debt snowball, while harder and slower initially, forces the borrower to modify their lifestyle, ensuring the debt stays gone forever.

Question 7

Debt Snowball vs. Bankruptcy:

Accepted Answer

In extreme cases, a borrower may consider Chapter 7 or Chapter 13 bankruptcy rather than attempting a snowball. Bankruptcy is a legal process that can discharge unsecured debts entirely, offering a true "clean slate." If a debt snowball calculator projects that it will take more than 7 to 10 years to pay off unsecured debt even with extreme budgeting, bankruptcy may be the more viable option. However, bankruptcy devastates a credit profile for 7 to 10 years, making it incredibly difficult to rent an apartment, buy a car, or even secure certain types of employment. The debt snowball preserves and eventually enhances the credit score, making it the vastly preferred alternative for anyone whose debt can mathematically be cleared within 3 to 5 years.

Question 8

Should I include my primary mortgage in the debt snowball?

Accepted Answer

No, your primary mortgage should not be included in your initial debt snowball list. The debt snowball is specifically designed to rapidly eliminate consumer debt, such as credit cards, personal loans, medical bills, and auto loans. Mortgages are typically massive, long-term debts with relatively low interest rates that are tied to an appreciating asset. Including a $300,000 mortgage in your snowball would completely halt your psychological momentum. Once all consumer debt is paid off, and a fully-funded emergency fund is established, you can then direct extra payments toward your mortgage as a separate, long-term wealth-building phase.

Question 9

What happens if two debts have the exact same principal balance?

Accepted Answer

If you have two debts with the exact same balance—for example, two credit cards that both have exactly $1,500 remaining—you should break the tie by looking at the interest rates. Attack the debt with the higher Annual Percentage Rate (APR) first. This minor adjustment allows you to save a small amount of money on interest without sacrificing the behavioral momentum of the snowball method. If the interest rates are also identical, simply pick the debt that causes you the most emotional stress or is held by the most annoying creditor, and attack it aggressively.

Question 10

Do I stop contributing to my 401(k) or IRA while doing the debt snowball?

Accepted Answer

This is a highly debated topic among financial professionals. The strict, traditional debt snowball methodology dictates that you should temporarily halt all retirement contributions, including employer matches, to free up every possible dollar for debt elimination. The reasoning is that the intensity required to finish the snowball quickly is diluted if you are still investing. However, many modern financial advisors argue that giving up a 100% employer match is mathematically disastrous. A moderate approach is to contribute only exactly enough to get the maximum employer match, and channel all remaining discretionary income into the debt snowball.

Question 11

How do I handle a debt with a 0% promotional interest rate?

Accepted Answer

If the 0% promotional period will outlast your projected payoff date for that specific debt, treat it exactly like any other debt and place it in its normal order based on the principal balance. However, if the 0% period is going to expire soon, and expiring will trigger retroactive deferred interest (common in retail store cards), you must manually prioritize that debt. Calculate exactly how much you need to pay each month to clear the balance before the expiration date, make that your new "minimum" payment for that card, and continue snowballing your other debts around it.

Question 12

What should I do if I have a major financial emergency while paying off debt?

Accepted Answer

If a true emergency strikes—such as a job loss, a major medical event, or a critical home repair—you must immediately pause the debt snowball. Revert to making only the minimum required payments on all your debts. Take the extra money you were using for the snowball and stockpile it in your checking account to cash-flow the emergency. Do not take on new debt to fund the emergency if you can avoid it. Once the crisis has passed and your income stabilizes, you simply restart the snowball exactly where you left off, utilizing the same mathematical order as before.

Question 13

Does the debt snowball method ruin my credit score?

Accepted Answer

No, the debt snowball method will ultimately improve your credit score significantly, though you may see minor fluctuations along the way. Your credit score is heavily influenced by your credit utilization ratio (how much debt you have compared to your limits) and your payment history. Because the snowball method requires you to make all minimum payments on time, your payment history remains flawless. As you rapidly pay down balances, your utilization ratio plummets, which drives your FICO score higher. The only way the snowball harms your score is if you mistakenly stop paying minimums on your larger debts, or if you immediately close every credit card the moment it hits a zero balance.

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