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Avalanche vs. snowball: Which is the best way to pay off debt?

See which method of tackling your debt is best to help you save time and money.

Both the debt avalanche method and the debt snowball method can help you pay off several debts as quickly and efficiently as possible. Which strategy will work best for you depends on your financial situation and motivational style.

Debt avalanche vs debt snowball: Which should I choose?

That depends on your financial situation and motivational style. If you have a number of smaller debts that are overwhelming to keep track of, the snowball method can help you clear those out and regain control of your finances. Whereas, if you have a lot of debt or are paying high interest rates on one or more debts, you might find it more motivating to save money in the long run by using the debt avalanche method.

And if neither one of those scenarios describe you perfectly, consider combining the two options — pay off your small debts first using the snowball method and then switch over to the avalanche method to pay your larger debts off in order of interest rates.

Avalanche method

When paying off debts using the debt avalanche method — also called the debt-stacking method — you pay off your debts with the highest interest rates first.

After paying off your highest interest rate debt, you’ll save money on the interest you no longer have to pay towards that debt. You can put those savings towards the next debt with the highest interest rate, and so on until you’re debt-free.

How the debt avalanche method works

Say you owe:

  • $500 on a payday loan with a 300% interest rate
  • $200 on a credit card with a 20% interest rate
  • $10,000 in student loans at a 7% interest rate

Using the debt avalanche method, you’d pay off these debts in the following 3 steps:

  1. Here, you’d start with your payday loan because you’re paying an extremely high interest rate. You’d first pay as much as you can on that debt each month and only make the minimum payments on your other debts. By focusing on the payday loan, you’re minimizing the amount you’d be paying towards interest, which leads to savings.
  1. When the payday loan is paid off, you’d move on to your credit card debt since it has the next highest interest rate. Because this is now your focus debt, you could redirect your payday loan repayment amount, and anything extra you can, towards this debt until it’s satisfied.
  1. Finally, you’d pay your student loan. Because it has the lowest interest rate and will take a long time to pay off, it’s ideal to save for last.

Pros and cons of the avalanche method

  • Minimize money spent on interest
  • Debts will be paid faster than they would with the snowball method
  • Less motivating than the snowball method
  • Can take a long time to pay off the first high-interest debt

Dive deeper into the debt avalanche method

Snowball method

With the snowball method, you pay off your smallest debts first. Once you pay the littlest debt, you use the money that you would have been paying on that debt and apply it to the next smallest debt. This way each time you pay off a debt — moving up your list from smallest to largest — you’ll have a larger payment amount to go towards the next debt in line.

The key to this method is that once you get the ball rolling and start seeing your minimal debts disappear, you’ll be able to move on and tackle the larger ones more easily and with more money.

How the debt snowball method works

Let’s say we have the same situation from before:

  • $200 on a credit card with a 20% interest rate
  • $500 on a payday loan with a 300% interest rate
  • $10,000 in student loans at a 7% interest rate

Using the debt snowball method, you would pay off your debt in these 3 steps:

  1. Because it is your smallest debt, you’d shoot to pay off your credit card first with any extra money you can put towards debt repayment. At the same time, you’d continue to make the minimum payments on your other debts.
  1. After paying off your credit card, you’d focus on your payday loan debt since it’s the next smallest debt. So if you were originally making minimum payments of $125 towards your payday loan, you’d add on the money you were paying towards your credit card to settle your payday loan debt quicker.
  1. After that, you’d take all of the money that you we’re paying towards previous debts and put them towards your student loan.

Pros and cons of the snowball method

  • Paying off the first debt can get you motivated
  • Eliminate the number of debts you have more quickly
  • May take longer than the avalanche method
  • Potential to pay more money towards interest in the long run

Dive deeper into the debt snowball method

Compare debt relief options

If you have too much debt to pay off using the avalanche or snowball method, consider taking out a debt consolidation loan. You can use this method to take out one loan to pay off all of your current debts. The debt consolidation loan you get often has a lower interest rate than your other debts, so you can pay more on your principle and less in interest.

If you have a number of smaller debts, than the better option might be to get a balance transfer credit card. You can move balances from multiple credit cards or other types of debt onto one single new card with a low introductory interest rate, usually lasting between 6 – 10 months. By paying off your debt within that timeframe, you could save a lot on interest.

Name Product Interest Rate Loan Amount Loan Term Requirements Credit Score Link
goPeer Personal Loan
8.00% - 33.92%
$1,000 - $25,000
36 - 60 months
Recommended income of $40,000 /year
Min. credit score: 600
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More Info
Canada's first regulated consumer peer-to-peer lending platform offering unsecured loans. Connects creditworthy Canadians looking for a loan with Canadians looking to invest. goPeer strives to offer the most competitive interest rates. Apply in minutes and get a response within 24 hours.
OFFER
Mogo Personal Loan
9.90% - 46.96%
$200 - $35,000
6 - 60 months
Min. income of $13,000 /year
Min. credit score: 500


Mogo offers a 100-day money-back guarantee. If you're not happy with your loan, pay back the principal and get your 100 days of paid interest and fees back.
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An online lender who aims for a hassle-free process through same-day unsecured loan approval and funding. Get a loan fast and track your credit score for free.
SkyCap Financial Personal Loan
12.99% - 39.99%
$500 - $10,000
9 - 36 months
Min. income of $1,200 /month, stable employment
Min. credit score: 550
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More Info
An online lender offering unsecured personal loans to borrowers with a wide range of credit scores. Apply in less than 5 minutes and if approved, receive financing in as little as 24 hours.
Loans Canada Debt Consolidation Loan
Secured from 2.00%, Unsecured from 8.00% to 46.96%
$300 - $50,000
3 - 60 months
No min. income or employment requirements
Min. credit score: 300
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More Info
LoanConnect Debt Consolidation Loan
5.99% - 47.42%
$500 - $35,000
12 - 60 months
No min. income or employment requirements
Min. credit score: 300
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More Info
LoanConnect is an online broker that matches borrowers to lenders offering debt consolidation loans in amounts up to $35,000. Get approved for multiple loan offers from different lenders, no matter your credit score.
Fairstone Debt Consolidation Loan
19.99% - 39.99%. Varies by loan type and province
$500 - $50,000
6 - 120 months
Able to make monthly repayments on your loan
Min. credit score: 560
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More Info
Consolidate your debt up to $20,000 for an unsecured loan and $50,000 for a secured loan.
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Name Product Balance Transfer Rate Balance Transfer Fee Purchase Interest Rate Annual Fee Min. Credit Score Description
Scotiabank Value Visa Card
0.99% for the first 6 months (then 12.99%)
N/A
12.99%
$29
Min. recommended credit score: 660
Get a 0.99% introductory interest rate on balance transfers with a 0% transfer fee for the first 6 months. Apply by February 28, 2022.
BMO CashBack Mastercard
1.99% for the first 9 months (then 22.99%)
1%
19.99%
$0
Min. recommended credit score: 660
Get 5% cash back on all eligible purchases in the first three months of card membership (up to max. spend of $2,000). Plus, get a rate of 1.99% on balance transfers with a 1% balance transfer fee for nine months.
Tangerine World Mastercard
1.95% for the first 6 months (then 19.95%)
3%
19.95%
$0
Min. recommended credit score: 600
Earn an extra 15% cash back (up to $150) on up to $1,000 of everyday purchases in the first 2 months Until January 31, 2022. Plus, get a 1.95% interest rate on balance transfers for the first 6 months (valid within the first 30 days of account opening, 1% transfer fee applies).
BMO Preferred Rate Mastercard
3.99% for the first 9 months (then 12.99%)
1%
12.99%
$20
Min. recommended credit score: 660
Get a rate of 3.99% on balance transfers for 9 months with a 1% transfer fee. Plus, get the $20 annual fee waived in the first year.
Tangerine Money-Back Credit Card
1.95% for the first 6 months (then 19.95%)
3%
19.95%
$0
Min. recommended credit score: 600
Earn an extra 15% cash back (up to $150) on up to $1,000 of everyday purchases in the first 2 months Until January 31, 2022. Plus, get a 1.95% interest rate on balance transfers for the first 6 months (valid within the first 30 days of account opening, 1% transfer fee applies).
BMO Rewards Mastercard
1.99% for the first 9 months (then 22.99%)
1%
19.99%
$0
Min. recommended credit score: 725
Get a bonus of 10,000 BMO Rewards points when you spend $1,000 in the first 3 months. Plus, get a rate of 1.99% on balance transfers for 9 months. A 1% fee applies to transferred balances.
BMO AIR MILES Mastercard
1.99% for the first 9 months (then 22.99%)
1%
19.99%
$0
Min. recommended credit score: 660
Get 800 AIR MILES Bonus Miles (enough for $80 towards purchases with AIR MILES Cash). Get a rate of 1.99% on balance transfers for 9 months. A 1% fee applies to transferred balances.
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Bottom line

There’s no “best” — especially when it comes to climbing out from under debt. If paying off your smallest debts first keeps you motivated the debt snowball method could be the best option for you. On the other hand, if you have high interest debt and saving on interest keeps you motivated, the debt avalanche method might be best.

If you’re still finding it difficult to pay off multiple debts at once using either method, consider options to consolidate your debt so you only have to make one monthly payment and can potentially save on interest. Read more about how debt consolidation works, and your 8 debt consolidation options, in our comprehensive guide.

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