PF Basics: Debt Avalanche Vs Debt Snowball – Which is better and Why

by | Jun 22, 2026

It is not news to anyone that Canadians are worried about debt. Data compiled by Ipsos for MNP Ltd in March 2026 found that 44% of Canadians are concerned about their current debt levels, while 47% regret how much debt they have. More worrying is that only 51% of Canadians believe they will be debt-free in retirement.

The debt that we have collectively accrued is spread over various loans, from credit cards, to mortgages, from payday loans to auto loans, and many others. If you have more than one type of loan and have ever looked online for tips and tricks to get debt free, you will surely have come across two terms: “Debt Avalanche,” and “Debt Snowball.”

Today, let’s talk about these two terms, and help unpack what they mean, and which might be the better option for you.

What are “Debt Avalanche” and “Debt Snowball”?

Both terms refer to styles of paying off debt. They are different ends to the same goal – which is to become debt free. Let’s take a fictitious example to help explain it better. Suzy owes $19,500 combined over various loans, and wants to become debt free. She has listed what she owes here:

  • Credit Card Debt: $2,500 owing at 22% interest
  • OSAP Loan: $11,000 owing at 5.4% (Provincial only)
  • Car Loan: $1,500 owing at 7%

How to pay all of this back? Whether you use the avalanche or snowball method, the first and most important thing to remember is to make the minimum payment on every single debt every single month. There’s no wiggle-room there. If you miss your payments, it could negatively impact your credit score, and that will make life harder in the future.

Once you’ve made your minimum payments, and still have money left over to put towards your debt, you can do one of the two options:

Method 1: The Debt Avalanche

According to the avalanche method, you pay off the highest interest rate debt first. In Suzy’s case, that means paying off her credit card before OSAP or her car loan. Once the credit card is fully paid off, Suzy then goes to the next highest debt (after making minimum payments on everything, of course) which is her car. Once the car is paid off, she pays off the OSAP.

This makes mathematical sense. The highest interest loans will cost you the most over time, so it makes sense to pay that one off first.

Method 2: The Debt Snowball

The snowball method looks not at interest rates, but at the balances. Once the minimum payment is made, look at the lowest owing. In Suzy’s case, that is the car loan. So in this method, she’d put all her extra money towards paying that off. Once the car is paid off, she’d go to her credit card, and finally the OSAP.

With this method, you’d pay more in interest, but you’d get quick wins killing off your smallest debts first.

Why Would Anyone Choose Snowball?

It would be fair for you to wonder that if it is clearly cheaper to so the avalanche method, why would anyone want to snowball their way out of debt? In August 2012, researchers David Gal and Blakeley McShane published a paper that found that the snowball was the more effective method.

The duo to answer the question of how people should structure goal-directed activity to maximize the likelihood of goal attainment, basically how should someone go about achieving their goal in the most effective way – by doing easy things first (smallest debt) or difficult ones (highest interest rate.)

They used a data set obtained from a debt settlement firm, and found that, “(1) closing debt accounts is predictive of debt elimination regardless of the dollar balance of the closed accounts, whereas (2) the dollar balance of closed accounts is not predictive of debt elimination when controlling for the fraction of accounts closed. These findings suggest that completing discrete subtasks might motivate consumers to persist in pursuit of a goal.”

In simple English, this means that when someone closes a debt, they feel good about achieving something, so the chances that they’d keep going are higher than if they closed the most expensive debt first.

Humans need small wins to keep us motivated. The snowball method does that.

But the Avalanche DOES Save Money

Before you think that everyone should blindly do the snowball method, consider this. In 2018, Evan McAllister found that, “For all analyzed income fractions, the avalanche method proved to be consistently more efficient than the snowball method in overall number of households. The number of households for which one was definitively faster than the other dropped quickly with increasing income fraction. Interestingly, even as the number of definitive households dropped, the overall ratio of one method to the other increased significantly, in favor of avalanche.”

So the avalanche method does save money.

However, the author goes on to conclude that, “The avalanche method does not offer significant psychological benefits to the consumer – if anything, the prospect of paying a very large debt is much more daunting than paying a smaller one. If the goal is for the individual consumer to simply pay off their debts the most quickly, and the consumer has no motivational or habitual issues that might complicate this, the avalanche (or the traditionalist approach) will nearly always be the superior choice. If poor habits of personal finance or motivation are a complicating factor in the consumer’s life, on the other hand, then the analysis here would lend credence to [Dave] Ramsey’s recommendations to use the snowball method.”

Which Method Should I Use?

It honestly depends on the type of person you are. If you are a highly disciplined person, who does not mind waiting a while to see results, then the avalanche method could work for you.

If this is not you, and you need to see wins to be motivated, the snowball method is the way to go.

One of the things I often tell my friends is that a lot of people optimize the “Finance” part of “Personal Finance” and if this is you (I’m looking at all the Excel freaks out there) then there is no harm in undertaking the avalanche method. I personally like to focus on the “Personal” part of “Personal Finance” and that means being honest about what is possible. And sometimes, I need a quick win, and that means the snowball method is OK too.

Remember, the aim is to get debt free. The journey you take to get there is your own.

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For Information Purposes Only. All comments, opinions and views expressed are of a general nature and should not be considered as advice and/or a recommendation to purchase or sell the mentioned securities or used to engage in personal investment strategies. Tax, investment and all other decisions should be made with guidance from a qualified professional.

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