debt-snowball method in action is shown below. In a real payoff scenario the different interest rates on debts will affect payoff times and might make the debt-snowball method less efficient than other plans. However, for the sake of illustrating the method, the example ignores accruing interest. A person has the following amounts of debt and additional funds available to pay debt (the debt is listed with the smallest balance first, as recommended by the method): Credit Card A – $250 balance – $25/month minimum Credit Card B – $500 balance – $26/month minimum Car payment – $2500 balance – $150/month minimum Loan – $5000 balance – $200/month minimum The person has an additional $100/month which can be devoted to repayment of debt. First two months – under the debt-snowball method, payments would be made to the creditors as follows: Credit Card A – $125 ($25/month minimum + $100 additional available) Credit Card B – $26/month minimum Car payment – $150/month minimum Loan – $200/month minimum Third month balance (presuming the person has not added to the balances, which would defeat the purpose of debt reduction) – Credit Card A would have been paid in full, and the remaining balances as follows: Credit Card B – $448 Car payment – $2200 Loan – $4600 Third month payments – the person would then take the $125 previously used to pay off Credit Card A and apply it as additional payment to the Credit Card B balance, which would make payments for the next three months as follows: Credit Card B – $151 ($26/month minimum + $125 additional available) Car Payment – $150/month minimum Loan – $200/month minimum Three more months (six total) – Credit Card B would be paid in full (the final payment would be $146), and the remaining balances would be as follows: Car Payment – $1750 Loan – $4000 Then the person would take the $151 previously used to pay off Credit Cards A & B and apply it as additional payment to the car loan balance, which would make payments as follows: Car Payment – $301 ($150/month minimum + $151 additional available) Loan – $200/month minimum It would take six months to pay the car loan (the final payment being $240), whereupon the person would then make payments of $501/month toward the loan (which would have a $2800 balance) for six months (with the last payment at $234).