How to pay off debt faster: avalanche vs snowball

The fastest way out of debt

To pay off debt faster, pay the minimum on every balance, then put every extra dollar toward one debt at a time until it’s gone. Two popular ways to choose that debt are the avalanche method, which targets the highest interest rate, and the snowball method, which targets the smallest balance. Both work because they focus your effort. Spreading extra money thinly across every balance feels fair, but it slows you down. Clearing one debt frees up its payment, which you then add to the next one, so your payments grow as you go.

List every debt in one place

Write down each debt with four details: who you owe, the balance, the interest rate and the minimum payment. Include credit cards, lines of credit, car loans, buy-now-pay-later plans and student loans. You’ll find the rate on your latest statement or in your lender’s app. Next, find your extra amount: the money left after essentials and minimums each month. Your budget is the best place to find it. Even a modest, steady extra payment shortens a payoff plan more than most people expect, because every dollar of principal you clear stops collecting interest.

The avalanche method

With the avalanche method, you send your extra money to the debt with the highest interest rate first, while paying minimums on the rest. When it’s paid off, you move to the next-highest rate. Mathematically, this usually costs the least in total interest and gets you out of debt soonest. The catch is that your highest-rate debt might also be a large one, so it can take a while before you see a balance hit zero. If you’re motivated by the numbers and can stay patient, the avalanche is often the most efficient choice.

The snowball method

With the snowball method, you put your extra money toward the smallest balance first, no matter the rate. Once it’s gone, you roll its payment into the next-smallest. You get quick wins early, which can be the boost that keeps you going for the whole plan. The snowball can cost more interest than the avalanche, especially if your biggest balance carries your highest rate. But the best plan is the one you finish. Some people mix the two: knock out one or two tiny balances for momentum, then switch to the highest rate.

Paying off credit card debt in Canada

Credit cards usually charge more interest than most other kinds of borrowing, so they’re often the first target. Paying only the minimum mostly covers interest and can stretch a balance out for years. Your statement shows an estimate of how long the minimum alone would take, which is worth reading once.

While you pay it down, try not to add new purchases to the card you’re clearing. On most cards, paying the full statement balance by the due date avoids interest on new purchases, so getting back to that point is a big milestone. Your bank can explain the grace period on your specific card.

Lowering the interest you pay

Some people move a high-rate balance to a lower-rate option, like a balance transfer offer or a consolidation loan. These can help, but read the details: transfer fees, how long a promotional rate lasts, and what the rate becomes afterwards. Ask your lender to explain the total cost before you sign anything. Consolidation only works if the old cards don’t fill back up. If you’re struggling to keep up with minimums, a non-profit credit counselling agency can talk through your options with you. Paying on time also matters for your credit score, which affects the rates you’re offered later.

Questions

Is avalanche or snowball better for paying off debt?

The avalanche method usually saves the most interest because it targets the highest rate first. The snowball method targets the smallest balance first, which gives quick wins and helps some people stay motivated. The better one is the one you’ll stick with.

How can I pay off credit card debt faster in Canada?

Pay more than the minimum every month, stop adding new purchases to that card, and put any extra money toward it first. A lower-rate option like a consolidation loan can help if you read the fees and terms carefully.

Does paying off debt improve my credit score?

It often helps. Paying on time and using less of your available credit are both linked to stronger scores over time, though every credit bureau weighs things in its own way.