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How to smash your debt.


Debt can weigh on your mind. It can simultaneously be the only thing you think about and one thought you try to avoid.

As the cost of living continues to rise, consumer debt has been rising along with it. According to a study by Statistics Canada, 44% of Canadians aged 15 years and older reported being very concerned with the impact of rising prices on their ability to meet day-to-day expenses. In addition, about 19% of individuals in the bottom household income group reported that they often had to borrow money from friends or relatives or take on additional debt to meet everyday expenses. Clearly, debt is top of mind for many Canadians, so what options are available to minimize or squash it?

In this blog post, we’ll share two methods to help you clear your debt – Avalanche and Snowball. Read on to learn more.



 Avalanche method. 

Good for you if: you want to pay the least amount in interest possible.

This method can save you more money because it requires you to tackle your highest interest debt first.



Grab a pen and paper and list your debts from the highest interest rate to the lowest. If you’re not sure what the interest rates are on each of your debts, you can refer to your most recent statements or contact the lending institution associated with each debt directly.



Once you’ve made the minimum monthly payment on all your debts, start making more than the minimum monthly payment on your highest interest debt until it’s paid off. You can review your budget to figure out if you have extra money you can afford to put toward that debt every month.



Once the first debt amount is cleared, repeat step 2 using your debt with the second highest interest rate. And so on and so forth until, voilà! Your debt disappears.


As you work your way through each debt, the amount of money going towards the principal (the amount still owed on the loan) will grow, just like an avalanche picking up momentum down a slope.



 Snowball method. 

Good for you if: you’re motivated by the completion of small goals.

This method is kind of like a mind trick. By tackling the smallest debt amount first, it may give you the motivation to stay the course in your debt repayment journey.



List your debt amounts from the lowest balance to the highest. You can review your budget to figure out if you have extra money you can afford to put toward your lowest debt every month after making the minimum payment on all other debts.



Like the avalanche method, you can start making more than the minimum payment on the debt with the lowest balance while making minimum payments on all other debts. Be sure to track your progress in your budget.



And again, like the avalanche method, you’ll repeat step 2, only you’ll move on to the second-lowest debt amount.

The regular payment amount from the previous debt will be added onto the minimum payment of the current debt, creating a snowball effect as you increase the size of your payments on each debt.



If you’re still unsure which debt repayment method is right for you, Credit Canada has a debt calculator that can make a recommendation.

It’s understandable to feel uneasy about your debt – after all, debt is stressful. But there’s value in seeking help. A recent study found that people who are open about their debt are more likely to get their finances in order. Talk to someone you trust, or get in touch with Credit Canada – as the longest-standing non-profit credit counselling organization in the country, they have many useful resources to help you take control of your debt. We’re proud to call them our partner.