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Debt Analysis 2026: Strategies to Pay Down Faster
Understand the true cost of your debts, discover the powerful impact of extra payments, and choose the best repayment strategy. Our free calculator shows how much you can save.
Analyze Your Debt
See the impact of extra payments on your debt.
Open the Debt CalculatorTypes of Debt and Their True Cost
Not all debts are equal. The interest rate determines how quickly a debt grows if left unpaid. Credit cards (15–22%) are the most expensive, followed by personal loans (6–12%), auto loans (4–8%), and mortgages (4–6% in 2026).
| Debt Type | Typical Rate | Priority |
|---|---|---|
| Credit card | 19–22% | Very high |
| Unsecured line of credit | 8–12% | High |
| Auto loan | 4–8% | Medium |
| Home equity line of credit | 6–7% | Medium |
| Mortgage | 4–6% | Lower |
The Impact of Extra Payments
Every extra dollar applied to a debt reduces the principal, which reduces future interest. The effect is particularly dramatic on high-interest debt. On a credit card at 19.99%, every $100 in extra payment saves approximately $20 in interest per year.
Our debt analysis calculator compares the baseline scenario (minimum payments only) with a scenario that includes extra payments. It shows the time saved and the interest avoided for your exact situation.
Repayment Strategies: Avalanche vs Snowball
Avalanche Method
Direct extra payments to the highest-interest debt while maintaining minimum payments on all others. Once the first debt is paid off, redirect that payment amount to the next highest-rate debt. Advantage: saves the most interest overall.
Snowball Method
Direct extra payments to the smallest balance, regardless of interest rate. Quick wins (eliminating a debt entirely) maintain motivation. Advantage: psychologically more effective for many people.
The cost difference between the two methods is often modest. What matters most is choosing a strategy and sticking to it. For financial advisors, tailoring the recommendation to the client's psychological profile is essential.
Frequently Asked Questions
Which is the better strategy: avalanche or snowball?
Mathematically, the avalanche method (paying off the highest-interest debt first) saves the most interest. However, the snowball method (paying off the smallest balance first) delivers quick wins that maintain motivation. Research shows that motivation is a key success factor. Choose whichever method suits your psychology.
How much money does an extra payment save?
The impact depends on the interest rate and the balance. For example, on a credit card balance of $25,000 at 19.99%, adding $200 per month in extra payments can save more than $15,000 in interest and shorten the repayment period by several years. Our debt analysis calculator shows the exact impact for your situation.
Should I pay off debt or invest?
The general rule: pay off high-interest debt (credit cards, personal loans) before investing, because the guaranteed return from repayment (eliminating a 19.99% rate) exceeds the expected return from markets. For low-interest debt (mortgage at 4–5%), the answer is more nuanced: investing in an RRSP at a high marginal tax rate may be more advantageous.
Is debt consolidation a good idea?
Consolidation can be advantageous if it reduces your weighted average interest rate. A consolidation loan at 8% to replace credit cards at 20% saves significantly. Be careful, however: consolidation does not fix spending habits, and you must avoid re-accumulating debt on the cards that were paid off.
See How Much You Can Save
Free calculator with before/after comparison using extra payments.
Résumé en français :Ce guide couvre l'analyse de dette et les stratégies de remboursement, notamment la méthode avalanche (intérêt le plus élevé en premier) et la méthode boule de neige (solde le plus petit en premier), l'impact des paiements supplémentaires sur le total des intérêts et le moment où il vaut mieux prioriser le remboursement de dettes plutôt que d'investir. Il renvoie à une calculatrice gratuite d'analyse de dette.