The debt avalanche method is the mathematically optimal strategy for eliminating debt. Instead of targeting the smallest balance (like the snowball method), you target the highest interest rate first. This minimizes the total amount of interest you pay over the life of your debt repayment — often saving hundreds or thousands of dollars compared to other approaches.
The avalanche requires patience. If your highest-rate debt is also your largest balance, you might not eliminate any account for months. For Canadians who can stay disciplined without quick wins, the avalanche is the superior choice.
Michael has three debts: $6,000 credit card at 22.99%, $3,500 personal loan at 14%, and $2,000 line of credit at 9%. He has $400/month extra after minimums.
Avalanche order: Credit card → personal loan → line of credit
Estimated total interest: ~$2,100 over 26 months
Snowball order: Line of credit → personal loan → credit card
Estimated total interest: ~$2,800 over 27 months
The avalanche saves Michael approximately $700 in interest and gets him debt-free one month sooner.
Interest compounds daily on most Canadian credit products. Every dollar of principal you reduce on a high-rate debt immediately stops generating that expensive interest. When you put money toward a 22.99% credit card instead of a 9% line of credit, you're essentially earning a 14% better return on that dollar.
Over months and years of repayment, this compounding effect adds up. The higher your interest rates, the greater the savings from using the avalanche method.
| Debt Type | Typical Rate | Avalanche Priority |
|---|---|---|
| Payday loan | 390%+ APR | First (always) |
| Store credit card | 29.99% | Very high |
| Standard credit card | 19.99%–22.99% | High |
| Unsecured personal loan | 12%–20% | Medium-high |
| Car loan | 5%–12% | Medium |
| HELOC | Prime + 0.5%–2% | Low |
| Mortgage | 4%–6% | Lowest |
For Canadians specifically, a few situations affect how you apply the avalanche:
The hardest part of the avalanche is the patience it requires. If your highest-rate debt is also large, it may take a year or more before you eliminate any account. Strategies to stay on track:
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