Snowball vs. Avalanche Method: Which Debt Repayment Strategy Works Best?

Introduction

Paying down debt can feel daunting, but choosing the right strategy makes all the difference. Two of the most popular methods are the snowball and avalanche approaches. Each has its own philosophy and benefits. In this article, we'll explain how each method works, compare the pros and cons, and help you decide which one fits your personality and financial situation. For more general tips on tackling debt with a limited income, see [How to Get Out of Debt on a Low Income](cleanslatehub.ca ↗).

How the Snowball Method Works

With the snowball method, you list your debts from smallest to largest and make minimum payments on all but the smallest balance. You direct any extra money toward that smallest balance until it’s paid off. Then you roll (or snowball) the freed-up payment into the next-smallest debt. This approach gives quick wins and momentum, even if your highest-interest debts linger longer. The Government of Canada notes that some people choose this method because paying off a small balance first can be motivating canada.ca ↗

How the Avalanche Method Works

The avalanche method prioritizes interest rates instead of balance size. You make minimum payments on all debts but put any extra money toward the account with the highest interest rate. Once that one is cleared, you move to the next-highest rate. This method usually saves the most money because you reduce expensive interest charges earlier, although it may take longer to see an entire balance disappear canada.ca ↗

Pros and Cons of Each Method

The snowball method’s biggest strength is psychological: paying off a balance quickly gives a sense of accomplishment. But because you might ignore high-rate debts, you could pay more interest overall. The avalanche method maximizes cost savings over time but requires patience because your first target might have a large balance. Either way, choose a payment schedule you can stick with; the Government of Canada cautions that a longer schedule means more interest, while a shorter one requires higher payments canada.ca ↗ You can even combine the two methods — start with snowball to gain momentum, then switch to avalanche to save on interest.

Choosing the Right Strategy and Conclusion

Think about your personality: do you need quick wins to stay on track, or are you disciplined enough to focus on long-term savings? Also consider your cash flow and interest rates. You can switch methods if your circumstances change. No matter which strategy you choose, stick with it and avoid taking on new debt. For more ways to simplify multiple debts, see [Debt Consolidation vs. Debt Settlement](cleanslatehub.ca ↗) and [Debt Relief Options in British Columbia](cleanslatehub.ca ↗).