During the COVID-19 MCOs (Movement Control Orders), Azman, like most Malaysians, spent most of his time at home. On top of working from home at his full-time job, he tried to make extra income by baking and selling cakes.

After a few months of selling cakes, he found that he was making an additional average of RM1,000 a month. He then used the extra money to pay more towards his loan installments using the debt snowball method to settle his debts faster.

He decided to look at the debt snowball method to see if it was a good way for him to tackle his debt.

What exactly is the debt snowball method and how does it work?

Using this method, once you’ve paid off the smallest repayment balance loan, you’d move on to paying off your loan with the next smallest repayment balance and keep going until you’ve paid off all your loans.

Depending on how much extra and how often you pay, you could end up paying your loans off in full faster than your agreed loan tenure. Hence, you end up having extra money to make larger repayments towards your other outstanding loans. 

How do you use the debt snowball method?

Now that you know what the debt snowball method is, here’s how you can use it to clear off your loans:

Should you use the debt snowball method to pay off your loans?

Before you decide if you should use the debt snowball method to pay off your loans, here are some things you need to know:

So is this the right method for you?

✅ If your credit card loan, which usually charges high interest on your unpaid balance, is your smallest loan, this method could be good for you.

❎ But if it’s not your smallest loan, and you’re not paying it off in full every month, you’ll end up paying more interest. So, the snowball method may not work for you. 

Here’s an example of how that would look like: 

Use our Total Repayment Calculator to calculate your personal loans

For the example above, since the credit card loan, with the highest interest rate is the smallest, the debt snowball could be a good method to use.

Things to remember before deciding to use this method

✅ Check if you can afford the extra repayments – If you can’t afford to pay extra on your loans, stick to your regular monthly repayments. 

✅ Make sure your loans that charge larger interest on unpaid balances, like credit cards, have smaller balances so you can tackle this debt earlier in your snowball.

✅ You still have to repay your other loans every month, so don’t skip any payments.

❓Still feel that this method is not the right fit for you? Explore the Debt Avalanche Method instead – a strategy that prioritises tackling debts with the highest interest rates first, enabling you to save on interest costs and accelerate your debt repayment journey.

Related links:

Credit Cards 101

Monthly Repayment Calculator

Personal Loans