If you’re ready to get out of debt, you may be considering using the debt snowball repayment strategy to do so. The debt snowball method increases motivation by getting quick wins while helping to reduce your overall debt burden. Here’s what you need to know about using the debt snowball if your mix of loans includes some at a 0% interest rate.

What Is the Debt Snowball Method?

The debt snowball strategyof debt repayment focuses on paying off debt by starting with the smallest balance and working toward the largest. You can think of it as making a snowball and putting it at the top of a hill. As the snowball starts to roll (you start to pay off debt), you’ll gradually pick up speed, and the snowball will get bigger and bigger until you eventually land at the bottom (where all debt is repaid).

Using the debt snowball strategy is simple. You’ll need to:

  1. Create a list of all debts and the amount you owe (excluding your mortgage).
  2. Order your list of debts from the smallest amount owed to the largest.
  3. Figure out how much money you can afford to put toward debt repayment after accounting for making all minimum payments.
  4. Begin putting any excess money toward your smallest debt while continuing to make the minimum monthly balance due on all other debts.
  5. Once the smallest debt is paid off, move everything you were paying toward that debt to the next smallest debt while continuing the minimum monthly balance due on all other debts.

The debt snowball method is designed to give you a quick win. When you quickly pay down the smallest debt, it helps keep you on track and excited to continue your debt repayment plan.

When to Pay Off 0% Interest Loans in Your Debt Snowball

Since the debt snowball strategy only looks at the amount due on the loan, the interest rate will have no bearing on the order in which the debt is paid down. When you list out all debts for your debt snowball, you’ll only consider the amount due. Then, starting with the smallest amount due, you’ll begin putting momentum behind your snowball, regardless of how much interest you owe on each debt.

This is not the case if you opt for another popular method of debt repayment, the debt avalanche. The debt avalanche method starts by listing out loans from highest interest rate to least. That would put a 0% interest loan at the bottom of your repayment list.

Regardless of which repayment strategy you choose, be sure to understand the fine print on if and when your interest rate changes from 0% to a higher rate. When introductory offers expire, the interest rate can spike significantly.

The Bottom Line

If you’re planning to follow the debt snowball method, you don’t need to worry about finding a place for 0% interest loans. However, if you want to save the most money possible by attacking debts with a higher interest rate first, you’ll want to opt for the debt avalanche debt repayment method instead––or consider a hybrid method that treats small and large balances differently.

Brooke Joly

Brooke is a freelancer who focuses on the financial wellness and technology sectors. She has a passion for all things wellness and spends her days cooking up healthy recipes, running, and snuggling up with a good book and her fur babies.


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