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Debt Snowball vs Debt Avalanche: Which one is the most suitable for Canadians?

Debt management is a major step in achieving financial freedom, particularly for Canadians facing rising living costs and high interest rates in 2025. With average household debt at $1.74 for every $1 of disposable income, according to Statistics Canada, choosing an effective repayment strategy is essential. The Debt Snowball and the Debt Avalanche are two common debt payment strategies that provide a systematic way of paying off debts. This article will compare these approaches, which are specific to Canadians, and allow you to make a decision most suitable to your financial situation. We will explore their mechanics, advantages, disadvantages, and practical tips so that you are equipped with the tools and means to control your money. For a step-by-step guide to building your strategy, check out How to Create a Debt Repayment Plan article.  

Overview of Debt Repayment Strategies

Paying off debt may seem daunting, particularly when one has several loans or credit card balances. Debt Snowball and Debt Avalanche are two methods that offer a clear way of handling debt systematically. Both are aimed at paying down debts one by one while making minimum payments on the rest, but they are different in terms of prioritization and psychological impact.

For the case of Canadians, the importance of selecting the most suitable method is dictated by the high interest rates on credit cards (usually 19-29%), as well as unique financial tools, including TFSAs or RRSPs. This article will deconstruct each approach to guide you in making an informed choice. This article breaks down each method to help you make an informed decision, and for those struggling with credit card balances, Managing Credit Card Debt in Canada offers additional strategies. 

The Debt Snowball Method: Small Wins to keep you Motivated

How It Works

The Debt Snowball is a method of debt repayment popularized by financial expert Dave Ramsey, in which the smallest debt is paid off first, regardless of interest rate.

You rank all debts in order of smallest to largest balance, pay the minimum on each debt, and direct extra money to the smallest debt. When you pay it off, you put that payment amount on the next smallest debt, which starts a snowball effect. To visualize your progress, explore the Debt Snowball Calculator Benefits in Canada for a tailored repayment plan.

Pros

  • Psychological Boost: The ability to quickly pay off smaller debts gives Canadians a sense of accomplishment, which makes them more committed.
  • Easy to Implement: Simple to monitor, particularly individuals who have several small debts, such as store credit cards or medical bills.
  • Momentum-Building: Every debt paid off leaves more money to pay the next, which speeds up the process.

Cons

  • Increased Interest Charges: High-interest debts should not be disregarded because they may cost more in the long run, which is an issue in Canada due to high credit card rates.
  • Reduced Progress on Large Debts: Large balances, such as student loans, may take more time to address.  

Example

A Canadian who has a credit card debt of $ 2,000, a car loan of $5,000 dollars and a student loan of $10,000 would target the $2,000 debt first, even though it may have a lower interest rate than the others.

The Debt Avalanche Method: Precise Money-Saving

How It Works

The Debt Avalanche is a strategy that aims to pay the debt with the highest interest rate first. You rank debts in order of highest interest rate, pay the minimum on each, and apply any extra funds to the debt with the highest interest rate. After paying off the highest-rate debt, you go to the next highest-rate debt, and reduce the overall interest paid.

Pros

  • Cost-Effective: Saves money by paying off high-interest debts first, which is essential to Canadians whose average credit card rates are 19-29%.
  • Accelerated Debt Payoff: Shortens the total payoff period of debts for high interest rates.
  • Strategic: Attracts the people who are more focused on financial efficiency.

Cons

  • Delayed Gratification: Some may get discouraged when they feel that there is not much progress, as the high-interest debts are huge, and some might be demotivated.
  • Demands Discipline: Tracking interest rates and staying committed can be challenging without quick wins

Example

Using the same debts as above, if the $2,000 credit card has a 25% interest rate, the $5,000 car loan 7%, and the $10,000 student loan 5%, you’d prioritize the credit card first.

Financial Context in Canada

In 2025, Canadians are confronted with some unique issues, including household debt fueled by mortgages, credit cards, and student loans. High credit card interest rates make the Avalanche method appealing for minimizing costs. The Snowball method, however, is more applicable to individuals with several smaller debts, such as retail or medical bills, which are prevalent among the younger Canadians. Both methods can be supplemented with tools such as budgeting apps (e.g., YNAB) or Canadian-specific financial products, e.g., low-interest balance transfer cards offered by Tangerine. For tips on managing debt amidst rising costs, see Strategies for Paying Off Debt During Inflation.  

Practical Tips for Selecting Debt Snowball and Debt Avalanche

Evaluate Your Personality

  • Snowball is the one to choose when you are the kind of person who lives on quick wins and needs to be motivated to keep going.
  • Choose Avalanche when you are analytical and oriented toward long-term savings.

Analyze Your Debt Portfolio

  • Use Snowball when you have several small debts (e.g., less than $5,000 each).
  • Use Avalanche on debts with high interest, such as credit cards with 20%+ rates.

Utilize Canadian Tools

  • Discover balance transfer cards with banks such as Scotiabank to reduce the interest rates and increase the effectiveness of the Avalanche.
  • With  Borrowell, you can track your credit score as you pay off debt.

Create a Budget

  • Both methods require a budget. Canadian-specific budgeting guides are available through resources such as  MoneySense.  
  • Use additional money through tax refunds or side jobs to pay off faster.

Take into account Hybrid Approaches

Stay Informed

Conclusion: Be in Control of Your Debt Today

The Debt Snowball and Debt Avalanche offer effective ways to get out of debt; however, choosing the right one will depend on your personality and financial circumstances. The Snowball method offers motivational wins, which is ideal for Canadians who have several small debts, and the Avalanche method saves money, which is ideal when it comes to paying off high-interest credit card balances. To learn more about tailored financial plans, visit Global Investor for resources and tools to help you move toward a debt-free future.

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