How to Get Out of Debt: Strategies That Work
Getting out of debt is less about finding a clever trick and more about picking one of two proven strategies and sticking with it consistently.
Debt Snowball vs. Debt Avalanche
The debt snowball method pays off your smallest balance first, regardless of interest rate, then rolls that payment into the next-smallest debt — the quick wins build momentum, which matters if motivation is your biggest obstacle. The debt avalanche method pays off the highest-interest debt first, which saves the most money mathematically over time. Both work if you follow through — pick whichever one you're more likely to stick with.
Non-Profit Credit Counselling
If your debt feels unmanageable on your own, non-profit credit counselling agencies (accredited members of Credit Counselling Canada) can help negotiate a debt management plan with your creditors, often at reduced interest rates — this is different from, and usually less damaging than, a formal consumer proposal or bankruptcy, which have significant long-term credit consequences.
Before You Stop Paying Anything
Contacting a lender proactively to discuss a hardship arrangement, before missing payments, is almost always better for your credit history than falling behind first and negotiating afterward — see the credit history guide on this site for how missed payments affect your file.
Frequently Asked Questions
- What's the difference between debt snowball and debt avalanche?
- Snowball pays the smallest balance first for quick psychological wins; avalanche pays the highest-interest debt first to minimize total interest paid. Both work — consistency matters more than which one you pick.
- Where can I get free debt help in Canada?
- Non-profit credit counselling agencies accredited by Credit Counselling Canada offer free or low-cost guidance and can negotiate debt management plans with creditors.
- Is credit counselling the same as bankruptcy?
- No. Credit counselling and a debt management plan are informal arrangements with less severe credit consequences than a formal consumer proposal or bankruptcy, which are legal processes with longer-lasting effects on your credit file.
- Should I contact my lender before missing a payment?
- Yes, generally. Proactively arranging a hardship plan before falling behind is usually better for your credit history than missing payments and negotiating afterward.
Informational content, not financial, tax, or legal advice. Verify amounts, limits, and current conditions directly with official sources (CRA, CDIC, OSFI) before making a decision.
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