What is the debt avalanche strategy?

The debt avalanche method involves aggressively paying off your highest interest debt — while making the minimum monthly payments on the others — before moving on to the next highest.

This method helps you pay off your debts faster and at a lower cost, because you reduce your largest interest charges and associated fees.

Empower your investments with Qtrade

Discover Qtrade's award-winning platform and take control of your financial future. With user-friendly tools, expert insights, and low fees, investing has never been easier.

Start Trading Today

How does the avalanche method work?

Let's say you have a $30,000 credit card balance at 29% APR, $20,000 in student loan debt at 6% interest, and a $1,200 medical bill that's interest-free.

Starting a debt avalanche, you would aim to pay off the credit card bill first with as much as you can squeeze out of your budget, and pay only the minimums on the other outstanding bills. Once your credit card is paid off, you'd move on the student loan, followed by the hospital bill.

Although it would take a lot longer to pay off the credit card than the hospital bill, you would save a substantial amount on interest in the long run.

Avalanche vs. snowball: how do they compare?

To compare debt avalanche and the debt snowball strategy, it's important to understand that the debt snowball involves starting with the lowest interest balances first — while making minimum payments on the rest.

Recycling the above example, the debt snowball method starts by paying off the interest-free hospital bill, followed by the $20,000 student loan debt, and ending with the $30,000 credit card debt (which has the highest interest).

If you need short-term victories to motivate you, you’re a debt snowball candidate — but even though the hospital bill is an easy win, $30,000 at 29% APR will compound faster than you'd like.

Unexpected vet bills don’t have to break the bank

Life with pets is unpredictable, but there are ways to prepare for the unexpected.

Fetch Insurance offers coverage for treatment of accidents, illnesses, prescriptions drugs, emergency care and more.

Plus, their optional wellness plan covers things like routine vet trips, grooming and training costs, if you want to give your pet the all-star treatment while you protect your bank account.

Get A Quote

Is the debt avalanche method right for you?

The debt avalanche method isn’t for those who seek instant gratification. Bigger debts take longer to pay off and it may take a while before you start seeing any meaningful progress.

It takes patience and self-discipline to stick to the debt avalanche strategy.

No matter which strategy you choose, make sure you create a budget you can stick to while paying off your debts — and set aside whatever you can in an emergency fund for surprise expenses.

Sponsored

Trade Smarter, Today

Build your own investment portfolio with the CIBC Investor's Edge online and mobile trading platform and enjoy low commissions. Get 100 free trades and $200 or more cash back until March 31, 2025.

Sarah Cunnane Former Staff Writer

Sarah Cunnane was formerly a staff writer at Money.ca. She is a writing and marketing professional with an Honors Bachelor's degree in English and Creative Writing from the University of Toronto.

Explore the latest articles

Can you pay the CRA with a credit card?

Can you pay your taxes using a credit card? Yes, but that doesn’t mean you should. Here’s what to consider before swiping for the taxman

Leanne Armstrong Contributor

Disclaimer

The content provided on Money.ca is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter. Advertisers are not responsible for the content of this site, including any editorials or reviews that may appear on this site. For complete and current information on any advertiser product, please visit their website.

†Terms and Conditions apply.