How this instrument works
The snowball method orders two or more debts by balance size, not by interest rate, and pays only the smallest one down first while making no separate progress on the rest. This instrument models that rule for two debts: it solves the same payoff-time identity used for a single loan — the one that inverts compound interest with a logarithm to find months from a fixed payment — but runs it twice, chained. Debt 1 balance (smaller, paid first) absorbs the entire Combined monthly payment budget, $ until Months to clear debt 1 (smallest first) is reached, and only then does that freed payment roll onto Debt 2 balance (larger, paid second).
While the smaller account is being cleared, the larger one does not sit still — Debt 2 balance once debt 1 is cleared compounds at Debt 2 APR, % for exactly Months to clear debt 1 (smallest first) months with nothing reducing it, because the whole budget was directed elsewhere. That growth is the method's real cost: choosing order by size rather than by rate means the account carrying the higher rate can be the one left compounding longest, and running the payoff formula a second time against that grown figure is what pushes Total interest paid, snowball order above what a rate-first order would produce on the same two accounts.
The model stays deliberately narrow. It chains exactly two debts rather than an open list, assumes Combined monthly payment budget, $ is available in full and unchanging from the first month, and assumes nothing at all is paid toward the second debt while the first is active — no minimum, no partial payment. A real plan with three or more accounts, a minimum kept current on every debt throughout, or a budget that grows over time will clear faster and cheaper than this two-debt, zero-minimum version shows; read the figures here as the mechanics of the ordering choice, not a forecast for any particular household.
- Enter the smaller balance and its rate under Debt 1 balance (smaller, paid first) and Debt 1 APR, %.
- Enter the larger balance and its rate under Debt 2 balance (larger, paid second) and Debt 2 APR, %.
- Set Combined monthly payment budget, $ to the total you can direct at both accounts together each month.
- Read Months to clear debt 1 (smallest first) and Debt 2 balance once debt 1 is cleared for the first stretch and the growth it produced.
- Read Total months to be debt-free and Total interest paid, snowball order for the full two-account result.
Worked example — a $3,000 balance and a $5,000 balance
Set Debt 1 balance (smaller, paid first) to $3,000 at Debt 1 APR, % of 12, Debt 2 balance (larger, paid second) to $5,000 at Debt 2 APR, % of 22, and Combined monthly payment budget, $ to 300. The first payoff-time run returns Months to clear debt 1 (smallest first) = 10.5886444594 — the full $300 goes at the $3,000 balance until it hits zero, with nothing at all directed at the larger one.
Across those 10.5886444594 months, Debt 2 balance once debt 1 is cleared compounds untouched at 22% and grows from $5,000 to $6,060.58 — over a thousand dollars added by interest alone before a single dollar of the budget reaches it. Feeding that grown figure back into the same formula, at the same $300 budget, gives Months to then clear debt 2 = 25.4644672125.
Total months to be debt-free adds the two stretches to 36.0531116719 — just over three years. Total interest paid, snowball order comes out to $2,815.93: the $300 budget kept flowing for 36.0531116719 months totals $10,815.93, of which $8,000 repays the original pair of balances and the remaining $2,815.93 is the cost of this ordering, plus the delay the second account spent compounding while it waited its turn.
Questions
What is the difference between the debt snowball and the debt avalanche?
Order. The snowball ranks accounts by balance, smallest first, regardless of rate; the avalanche ranks by rate, highest first, regardless of size. On the $3,000-at-12%-and-$5,000-at-22% example above, an avalanche order would attack the 22% balance first and typically finishes with less total interest than this sheet's $2,815.93, because the costlier account stops accruing sooner — the tradeoff the snowball accepts is a slower first win in exchange for an early paid-off account.
Why pay off the lower-rate balance first?
Because this method orders strictly by size, not cost. Clearing the smaller balance first, even at a lower rate than the second one, produces a visible payoff sooner, which is the method's whole premise: an early paid-off account keeps someone paying at all. The measurable price of that choice is exactly what Total interest paid, snowball order reports for the two accounts entered.
Why does the second balance exceed its original $5,000 by the time its turn arrives?
Because interest keeps compounding on it while it waits. At a 22% APR, that balance accrues interest every month the first account is absorbing the entire Combined monthly payment budget, $ — over the 10.5886444594 months that takes here, the untouched $5,000 grows to $6,060.58 before any of the budget is redirected toward it.
Does the sheet keep paying a minimum on the second debt while the first is being cleared?
No — it assumes zero payment toward Debt 2 balance (larger, paid second) until debt 1 reaches exactly zero, so the full Combined monthly payment budget, $ goes to debt 1 alone. A real plan usually keeps some minimum current on every other account throughout; skipping that minimum here means Debt 2 balance once debt 1 is cleared is closer to a best case for how little that balance would actually grow.
What happens if the budget cannot cover the first debt's own interest?
The first balance never shrinks, and the payoff formula has no valid answer. At $3,000 and a 12% APR, monthly interest alone runs $30, so Combined monthly payment budget, $ has to clear that floor just to make any progress at all — a budget at or below it leaves the balance flat or rising, long before the second account even enters the picture.
Can this sheet handle three or more debts?
Not this exact version — it chains precisely two payoff-time runs, one for each balance entered. A longer list follows the same logic extended account by account: rank every balance smallest to largest, direct the full budget at the smallest until it clears, then roll that freed payment onto the next one, repeating the chained formula each time an account reaches zero.
References
- CFPB — Consumer tools for credit cards and debt
- Federal Reserve — Consumer Credit statistical release (G.19)
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.