Quick Comparison
The Two Methods
| Method |
Pay Off First |
Benefit |
| Avalanche |
Highest interest rate |
Saves most money |
| Snowball |
Smallest balance |
Fastest wins |
Debt Avalanche Method
How It Works
| Step |
Action |
| 1 |
List all debts by interest rate (highest first) |
| 2 |
Make minimum payments on all |
| 3 |
Put extra money on highest rate debt |
| 4 |
When paid off, move to next highest |
| 5 |
Repeat until debt-free |
Example
| Debt |
Balance |
Rate |
Minimum |
| Credit Card A |
$3,000 |
22% |
$90 |
| Credit Card B |
$5,000 |
19% |
$150 |
| Car Loan |
$8,000 |
7% |
$200 |
| Student Loan |
$15,000 |
5% |
$175 |
Avalanche order: Credit Card A → Credit Card B → Car Loan → Student Loan
Pros & Cons
| Pros |
Cons |
| Saves most on interest |
Largest debt may take longest |
| Mathematically optimal |
Slower initial progress |
| Best total outcome |
May feel less motivating |
Debt Snowball Method
How It Works
| Step |
Action |
| 1 |
List all debts by balance (smallest first) |
| 2 |
Make minimum payments on all |
| 3 |
Put extra money on smallest balance |
| 4 |
When paid off, move to next smallest |
| 5 |
Repeat until debt-free |
Example (Same Debts)
| Debt |
Balance |
Rate |
Minimum |
| Credit Card A |
$3,000 |
22% |
$90 |
| Credit Card B |
$5,000 |
19% |
$150 |
| Car Loan |
$8,000 |
7% |
$200 |
| Student Loan |
$15,000 |
5% |
$175 |
Snowball order: Credit Card A → Credit Card B → Car Loan → Student Loan
In this example, the order is the same, but often it differs.
Different Example
| Debt |
Balance |
Rate |
Avalanche |
Snowball |
| Store Card |
$500 |
18% |
3rd |
1st |
| Credit Card |
$3,000 |
22% |
1st |
2nd |
| Car Loan |
$8,000 |
7% |
4th |
3rd |
| Personal Loan |
$5,000 |
12% |
2nd |
4th |
Order differs based on method.
Pros & Cons
| Pros |
Cons |
| Quick wins |
Pays more interest overall |
| Builds momentum |
Not mathematically optimal |
| Psychologically rewarding |
May take longer total |
Math Comparison
| Debt |
Balance |
Rate |
| Credit Card |
$8,000 |
22% |
| Personal Loan |
$10,000 |
12% |
| Car Loan |
$7,000 |
7% |
| Student Loan |
$5,000 |
5% |
Results
| Method |
Time to Debt-Free |
Total Interest |
| Avalanche |
~32 months |
~$4,800 |
| Snowball |
~34 months |
~$5,600 |
| Difference |
2 months |
~$800 |
Avalanche saves money, but the difference depends on your specific debts.
Which Should You Choose?
Choose Avalanche If
| Situation |
Why |
| You’re disciplined |
Can stick to plan without quick wins |
| High-rate debt is small |
Will pay off quickly anyway |
| Saving money is priority |
Maximum interest savings |
| Debts have big rate differences |
Greater savings |
Choose Snowball If
| Situation |
Why |
| You need motivation |
Quick wins keep you going |
| You’ve tried before and quit |
Different approach |
| Balances are similar |
Order matters less |
| Smallest debt has low rate |
Psychological benefit |
Hybrid Approach
Best of Both
| Strategy |
How |
| Start with snowball |
Pay off 1-2 small debts |
| Switch to avalanche |
Then focus on high interest |
| Get wins AND savings |
Balanced approach |
Alternative: Same Rate First
| If Two Debts Similar Rate |
Choose |
| 22% on $3,000 vs 21% on $500 |
Pay the $500 first |
| Barely lose interest |
Gain psychological win |
Step-by-Step Implementation
Getting Started
| Step |
Action |
| 1 |
List all debts (balance, rate, minimum) |
| 2 |
Choose method |
| 3 |
Set up automatic minimums |
| 4 |
Allocate extra payment |
| 5 |
Track progress monthly |
| Source |
Amount |
| Reduce expenses |
Varies |
| Side income |
Varies |
| Tax refund |
Annual |
| Sell unused items |
One-time |
| Cancel subscriptions |
$50-200/month |
Common Questions
What About 0% Balance Transfers?
| Action |
|
| Use 0% period |
Pay off before promo ends |
| In avalanche |
Becomes lowest priority |
| In snowball |
Based on balance size |
| Watch end date |
May need different strategy |
Should I Invest or Pay Debt?
| Debt Rate |
Action |
| Over 8-10% |
Pay debt first |
| Under 5% |
Consider investing |
| Between |
Depends on risk tolerance |
What About Employer Match?
| Always | Get full employer RRSP match |
| Then | Pay high-interest debt |
| Match is | Instant 50-100% return |
Tracking Your Progress
Simple Tracker
| Month |
Debt Name |
Start |
Payment |
Balance |
| Jan |
Credit Card |
$3,000 |
$600 |
$2,400 |
| Feb |
Credit Card |
$2,400 |
$600 |
$1,800 |
| Mar |
Credit Card |
$1,800 |
$600 |
$1,200 |
Celebrate Wins
| Milestone |
Celebration |
| First debt paid |
Small treat |
| Halfway |
Acknowledge progress |
| Debt-free |
Meaningful reward |
After Debt is Gone
Next Steps
| Step |
Action |
| 1 |
Build emergency fund (3-6 months) |
| 2 |
Increase retirement savings |
| 3 |
Save for goals |
| 4 |
Don’t accumulate new debt |