Debt snowball vs. debt avalanche: which strategy is right for you?

The debt snowball and debt avalanche are two of the most popular debt repayment methods. Here's how to choose the right strategy for you.

Author: Jordann Brown

Like it or not, if you're Canadian, you'll probably have debt at some point in your life. In fact, the average Canadian carries more than $21,000 in non-mortgage debt. While this debt usually builds up over the course of many everyday transactions, it's important to pay it off as soon as possible.

Unfortunately, just making extra payments on your debt isn't enough. You need a strategy to stick with your debt repayment long enough to call yourself debt free. Luckily, some of the groundwork for erasing debt has already been mapped out with two different approaches: the debt snowball and the debt avalanche.

What is the debt snowball method?

The debt snowball works on the same principle as building a regular snowball in your backyard. You start with a tiny bit of snow that gradually grows as you roll it.

The debt snowball works the same way. This tactic calls for you to list all of your debts from smallest to largest, regardless of the interest rate. Then, you make the minimum payments on all of your debts except for the smallest one. Focus all of your extra money on your smallest debt, and when that's paid off, move on to the next smallest one, continuing on until all of your debts are paid off. By the time you near the end, each payment you make toward your largest debt has the full financial force of all of your monthly debt payments combined. That's a hefty snowball. 

Pros of debt snowball:

This method of debt repayment is popular, and for good reason.

  • You'll enjoy immediate gratification by knocking out the smaller debts quickly.
  • When you reach your larger debts, you'll be able to make bigger payments because your other debts are already out of the way.
  • Paying off smaller debts will give you the momentum you need to tackle the bigger debts.

Cons of debt snowball:

However, this method does come with one major drawback.

By prioritizing your debts in order of balance rather than focusing on the debt with the highest interest rate first, you end up paying more in interest over the long term.

How does the debt avalanche method work?

The debt avalanche is another debt repayment strategy. With the avalanche method, you focus on wiping out the debts that cost you the most first: the ones with the highest interest rates.

For example, if you had a $5,000 car loan at 2.99 percent, a $7,000 credit card balance at 19.99 percent, and $15,000 in student loan debt at 5.5 percent interest, you would tackle the credit card debt, then the student loan debt, then the car loan debt.

Pros of debt avalanche:

The debt avalanche is a often considered smart money management. Why?

Focusing on the debt with the highest interest rate is mathematically the least expensive way to become debt free.

Cons of debt avalanche:

However, repaying debt by interest rate instead of balance could slow you down.

Some people may get discouraged when they don't see enough progress with this strategy and give up before reaching their goal.

How to choose between the debt snowball and the debt avalanche

Both of these strategies are effective methods for paying off debt, and both have been tried and tested by thousands of people. The best option for you depends on your situation and personality. You probably know yourself pretty well, so ask yourself: am I the type of person who enjoys quick wins and needs momentum to complete a task, or do I thrive on numbers and the satisfaction of knowing I'm tackling my debts in the most logical way possible?

If you like the idea of sweeping away your smaller debts and then focusing solely on your final and largest debt, the debt snowball might be right for you. If you're happier going after your highest-interest debt because it'll save you money, even realizing that it comes with less dramatic results in the short term, consider the debt avalanche method instead. 

No matter which strategy you choose to reach your financial goals, it's important to build a budget that cuts out unnecessary costs so that you can send as much money toward your debts as possible. Once you've determined how much you can afford to repay each month, build up a small emergency fund to help you withstand unexpected costs while you focus on your debt. Once your emergency fund is topped off, you'll be ready to tackle your debt.


The information contained in this article is for information purposes only and is not intended to provide specific financial or other advice and should not be relied upon in that regard. Individuals should seek the advice of qualified professionals to ensure that any action taken with respect to this information is appropriate to their specific situation.