Personal finance · Calculator walkthrough
Debt Snowball vs. Avalanche: Worked Payoff Comparison
The debt avalanche targets the highest interest rate first. The debt snowball targets the smallest balance first. Both keep required payments going on the other debts and roll freed payment money to the next target.
By ToolsFA · Educational guide
Open the debt payoff calculator →
Key takeaway: Avalanche usually reduces modeled interest when payments and account terms stay the same; snowball can create an earlier small-balance win. The best plan is one you can afford and maintain.
How the two payoff orders differ
With the avalanche method, direct extra money to the debt with the highest annual percentage rate while continuing required payments on the others. When that debt is cleared, roll its former payment and the extra amount to the next-highest rate.
With the snowball method, direct extra money to the smallest balance first, regardless of rate. After it is cleared, roll that payment to the next-smallest balance. This may provide a faster visible milestone, but it can cost more interest when a high-rate balance waits longer.
Worked example with the same monthly budget
Assume three fixed-rate debts: CAD 2,400 at 24.99% with a CAD 75 monthly payment, CAD 5,000 at 12.99% with a CAD 150 payment, and CAD 900 at 8.99% with a CAD 50 payment. Add CAD 200 per month, keep the total CAD 475 payment constant, apply interest monthly at APR ÷ 12, make no new charges, and roll every freed payment to the next target.
Under this simplified model, avalanche clears the balances in about 20 months with approximately CAD 1,072.87 of interest. Snowball also takes about 20 months but produces approximately CAD 1,166.07 of interest. The avalanche saves about CAD 93.20 in this example. Different balances, rates, payment dates, fees or creditor methods will change the result.
| Method | First target | Modeled payoff | Modeled interest |
|---|---|---|---|
| Avalanche | CAD 2,400 at 24.99% | About 20 months | About CAD 1,072.87 |
| Snowball | CAD 900 at 8.99% | About 20 months | About CAD 1,166.07 |
Use the calculator one debt at a time
The ToolsFA calculator models one balance and one fixed APR. Start with the current target debt, enter its balance, rate and planned payment, then use the extra-payment field to test the amount available for that target.
After a payoff, run the next debt again using its then-current statement balance and the larger rolled payment. Do not enter the combined balances with one average APR: that can hide the cost of the highest-rate account.
- List every current balance, APR and required payment from the latest statements.
- Choose either highest APR or smallest balance as the first target.
- Keep at least the required payment going to all other accounts.
- Model the target debt with the extra amount, then update the next balance after payoff.
- Check creditor payoff figures before the final payment because daily interest and fees can change the amount.
What the calculator does not combine
It does not manage several accounts, choose a payoff order, import statement data or model promotional expiry dates. It assumes a fixed APR, monthly interest at APR ÷ 12, regular monthly payments, no new charges and no missed payments.
Credit cards may use daily balances and account-specific allocation rules. Treat the output as a comparison, then confirm each account’s terms and payoff amount with the creditor.
When affordability matters more than the method label
A schedule that looks cheapest on paper is not useful if its monthly payment is unsustainable. Start with a budget, deal with past-due accounts, and choose an extra amount that can continue through irregular expenses.
If minimum payments are already difficult, contact creditors or a reputable nonprofit credit counsellor before relying on a calculator scenario. Consolidation can simplify payments, but a longer term may increase total interest even if the rate is lower.
Frequently asked questions
Does avalanche always save more interest?
It generally targets expensive debt sooner, but the result depends on balances, rates, payments and whether you maintain the plan. Model your actual accounts.
Can I combine all debts in one calculator entry?
Not accurately when the debts have different rates or terms. Model each balance separately and update it from current statements.
Should I stop minimum payments on other debts?
No. Both methods assume required payments continue on every account while extra money goes to the current target.
Why can the creditor payoff differ from the estimate?
The tool uses monthly APR ÷ 12. A creditor may use daily interest, fees, new transactions and account-specific payment allocation.
Official sources
- Financial Consumer Agency of Canada: paying back your debt
- Financial Consumer Agency of Canada: paying off your credit card
- Financial Consumer Agency of Canada: debt consolidation
Sources were reviewed for this guide; see the Updated date above. Examples are illustrative, not personal financial advice. Confirm your current account terms and use assumptions you can explain.