Should People With High-Interest Debts Avoid the Debt Snowball?

If you’re looking for a way to get out of debt fast, you may be considering the debt snowball method to pay off those unpaid balances. But what if you have high-interest debts? Is the debt snowball still your best bet?

In this article, we’ll discuss what the debt snowball strategy is, if you should use it on your high-interest debts, and other debt-relief tools to consider. 

What’s the debt snowball method? 

The debt snowball method is a debt payoff method that focuses on eliminating your smallest balances first. You continue to pay the minimum amounts on your debts to avoid dinging your credit score or accruing late fees, but any leftover cash goes toward your smallest balance. Once that’s paid off, you’ll move on to the second smallest debt.

The debt snowball is great if you need to feel motivated on your debt payoff journey. Watching yourself progress by knocking out the smallest debts first can give you the encouragement you need to stick with your debt repayment plan. 

Should I use the debt snowball method if I have high-interest debts?

While the debt snowball can be a very effective debt relief tool, it may not be the best fit for high-interest debts. If your debts have high-interest rates, you may want to instead follow the debt avalanche method. The debt avalanche method focuses on eliminating high-interest debts first rather than small balances.

You’ll still pay all your minimum amounts, similar to the debt snowball, but your extra money will instead go toward the debt with the highest interest rate. Once that’s paid off, you’ll work on paying off the debt with the second-highest rate.

The debt avalanche can help you save money overall since you’re kicking those high-interest debts to the curb sooner rather than later.  

Other debt relief options

Other debt repayment and relief options to consider include balance transfers, debt consolidation loans, and debt management plans:

Balance transfers

With a balance transfer, you’ll place your existing credit card balances on a new card that has a 0% APR introductory promotional offer. You’ll work on paying off your debt during this period.

Note that if you can’t pay off your debt by the time the period expires, you could be stuck paying an extremely high-interest rate on your remaining balance.  

Debt consolidation loans

With a debt consolidation loan, you’ll take out a new loan to pay off your existing balances. Debt consolidation loans often have lower interest rates than credit cards, so you’ll be able to save cash as you pay off your debt. These can be a good option if you have a great credit score and can secure a favorable interest rate.

Debt management plans

With a debt management plan, you’ll work with a nonprofit credit agency to roll your existing debts into one monthly payment and reduce your interest rate. You’ll have a fixed payment plan that will help you pay off your debt in approximately 3-5 years. 

If you’re stuck with high-interest debt, the debt snowball may not be your best option. The debt avalanche can help you get rid of the debts with the highest interest rates so you can save money overall. Whichever debt relief option you pick, the most important thing is that you stick with it so you can eventually achieve financial freedom. 

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