The choice between the debt snowball method and the debt avalanche method is one of the most common decisions when building a debt repayment plan. If you're focused on debt repayment Canada-wide—whether you have credit cards, lines of credit, or student loans—this guide compares the two approaches, shows step-by-step setup, gives a numeric example, and points to Canadian resources to help you pick the best strategy.
Quick overview: snowball vs avalanche
Debt snowball method: Pay the minimum on all debts, then focus extra payments on the smallest balance first. Good for building momentum and motivation.
Debt avalanche method: Pay the minimum on all debts, then apply extra payments to the debt with the highest interest rate first. Best for saving on interest and lowering total cost.
Both methods work. The right one depends on your financial situation and what motivates you to stick with the plan.
How each method works — step-by-step
Gather all debt details: balance, interest rate (annual %), minimum payment, and creditor.
Choose your extra payment amount — the monthly sum you can put toward repayment beyond minimums.
Apply the method below to order your repayment priorities.
Reassess every 3–6 months and after major life events (job change, new child, move).
1) Debt snowball method — step-by-step
List debts from smallest balance to largest balance.
Continue making minimum payments on every debt.
Apply the extra payment to the smallest balance until it's paid off.
When a debt is cleared, roll its payment into the next smallest debt (snowball effect).
Repeat until all debts are repaid.
2) Debt avalanche method — step-by-step
List debts from highest interest rate to lowest interest rate.
Continue making minimum payments on every debt.
Apply the extra payment to the highest-rate debt until it's paid off.
When a debt is cleared, take the freed-up payment and apply it to the next highest-rate debt.
Repeat until all debts are repaid.
Numeric example (simple) — see the difference
Assume three debts:
Card A: $3,000 at 22% APR, minimum $90
Card B: $6,000 at 14% APR, minimum $180
LOC: $12,000 at 6% APR, minimum $240
Extra monthly amount available: $200.
Avalanche order: Card A (22%) → Card B (14%) → LOC (6%). Avalanche reduces interest fastest; you'll pay less total interest and become debt-free sooner.
Snowball order: Card A ($3,000) → Card B ($6,000) → LOC ($12,000). This builds quick wins (paying off Card A first gives a motivational boost).
In most cases the avalanche method saves more in interest. But the snowball often leads to higher adherence because of frequent small wins.
Pros and cons (comparison)
Snowball
Pros:
Quick psychological wins
Simple tracking
Can reduce temptation to use credit
Cons:
Usually costs more in interest over time
Not optimal for minimizing total repayment cost
Avalanche
Pros:
Minimizes interest paid
Often faster overall payoff
Cons:
Slower emotional wins, which can hurt motivation
Requires discipline and tracking of interest rates
Which method should you pick? Decision checklist
Choose avalanche if:
Your primary goal is to pay the least interest.
You're disciplined and motivated by numbers.
You have high-interest balances (credit cards, payday loans).
Choose snowball if:
You need quick wins to stay motivated.
You've tried to pay down debt before and stopped.
Your debts are similar in interest rate and you value momentum.
Consider a hybrid approach:
Use snowball for the first one or two small debts to build momentum, then switch to avalanche.
Alternatively, prioritise revolving high-rate accounts (e.g., pay cards first) while snowballing smaller instalment loans.
Practical implementation tips for Canadians
Automate payments: Set up automatic minimum payments and separate automatic transfers for your extra payment to avoid missed months.
Avoid new debt: Pause credit card use; consider holding cards in a safe place or freezing them in your wallet.
Balance transfers and consolidation: A low-interest or 0% balance transfer or a consolidation loan can speed payoff. Check fees and terms; in Canada, some offers have transfer fees and promotional periods. Consider proposals from your bank or credit union and compare with options described by the Financial Consumer Agency of Canada.
Emergency fund: Keep a small buffer (e.g., $500–$1,000) so you won't need to use credit again for small shocks.
Tax and government programs: Student loan interest handling varies by province and federal loans. For major decisions about household finances (RRSP withdrawals to pay debts, etc.), review tax implications or talk to a financial advisor.
Helpful Canadian resources:
Financial Consumer Agency of Canada — Managing debt — tools and guides for budgeting and repayment.
Office of the Superintendent of Bankruptcy Canada — Alternatives to bankruptcy — information on consumer proposals and insolvency.
Credit Counselling Canada — nonprofit credit counselling and debt management help.
Behavioural tips to stay on track
Track progress visually: Use a chart or app to mark each paid-off account.
Celebrate milestones: Small, inexpensive rewards for each account closed.
Accountability: Tell a trusted friend or family member your plan; check in monthly.
Reallocate windfalls: Apply tax refunds, bonuses, or gifts to the extra payment.
When to seek professional help
If you're unable to make minimum payments.
If collection calls are frequent or legal notices arrive.
If debts are overwhelming and bankruptcy or a consumer proposal might be needed.
Professionals in Canada:
Licensed insolvency trustees (for consumer proposals/bankruptcy). Search via government resources.
Non-profit credit counsellors for budget plans and debt management programs.
Quick action plan — 7 steps you can start today
List every debt with balance, APR, and minimum payment.
Choose snowball, avalanche, or hybrid based on checklist above.
Decide on your monthly extra payment amount.
Automate payments and transfers.
Build a small emergency fund ($500–$1,000).
Consider consolidation options, but read the fine print.
Reassess monthly and move windfalls to debt.
Final notes
Both the debt snowball method and the debt avalanche method are proven approaches for debt repayment in Canada. Avalanche is mathematically superior for interest savings; snowball wins on behavioural adherence. The best plan is the one you start and stick with. Use Canadian resources like the Financial Consumer Agency of Canada for tools, calculators, and localized guidance.