Which method is commonly referred to as the debt snowball?

The debt snowball method is a popular strategy for managing and paying down personal debt. It involves listing all debts in order from the smallest balance to the largest, regardless of interest rates. The individual then focuses on making the minimum payments on all debts except the smallest one, to which they direct any extra funds. Once the smallest debt is paid off, they move on to the next smallest, adding the payment amount they were using on the first debt to the next smallest, thereby creating a "snowball" effect as they gain momentum and continue to pay off larger debts.

This method is effective because it can boost motivation by providing quick wins, as people see their smaller debts eliminated more quickly. The psychological benefits of successfully paying off debts can encourage individuals to stay committed to their overall debt repayment strategy. The focus on smaller debts first may help maintain a sense of control and progress, which is critical in dealing with financial challenges.

In contrast, the other options describe different approaches and techniques that do not align with the specific principles of the debt snowball method. Refinancing focuses on changing the loan structure to possibly save on interest, while debt consolidation combines multiple debts into a single loan, which is not how the snowball method operates.