This debt payoff calculator helps you see how long it will take to repay your debt. If you have multiple sources of debt at different interest rates, this calculator will help you calculate how long it will take to pay off your debt with set payments. This calculator will also help you see the required payment to be debt free by a specific timeframe.
How this debt payoff calculator works
This debt payoff calculator works by allowing you to enter the current balance as well as interest rate for various types of debt. This will help to calculate the total interest on your debt that you must pay. You can provide an expected monthly payment, which will then calculate how long it will take for repayment.
You can also provide a timeframe that you want to be debt free in. This will then calculate the required payment to be debt free by the end of the expected period. This calculator will show you a breakdown of the principal and interest paid over the course of the debt being outstanding. This allows you to compare various monthly payment amounts to see how much interest you can save.
You can categorize your debt into various types to help recognize which line each amount relates to, such as credit card, automobile, line of credit, overdraft, as well as other debt. If you have multiple sources of high-interest debt, debt consolidation can help you reduce the total interest rate across all of your debt, allowing you to become debt free faster.
Which debt should I pay off first?
There are two common strategies for paying off debt: the debt avalanche method and the debt snowball method. Understanding the difference can help you choose the right approach for your situation.
Debt avalanche method
The avalanche method prioritizes paying off the debt with the highest interest rate first. With equal payments, this method will pay off debt faster and you will pay less total interest compared to the snowball method.
Debt snowball method
The snowball method requires that you pay off your lowest outstanding balance first. This method helps you eliminate individual debts faster, creating momentum and motivation to keep going. While you may pay slightly more in total interest, the psychological benefits of quick wins keep many people on track.
Worked example: avalanche vs. snowball
Consider a household with the following debts and $1,500/month available for total debt payments:
| Debt | Balance | Interest Rate | Minimum Payment |
|---|---|---|---|
| Credit card A | $5,000 | 19.99% | $150 |
| Credit card B | $8,000 | 19.99% | $240 |
| Car loan | $15,000 | 6.99% | $350 |
| Student loan | $12,000 | 5.50% | $200 |
| Total | $40,000 | — | $940 |
The extra monthly payment available is $1,500 − $940 = $560.
Avalanche method order: Credit card A (19.99%) → Credit card B (19.99%) → Car loan (6.99%) → Student loan (5.50%)
- Credit card A paid off in ~7 months
- All debt paid off in approximately 30 months
- Total interest paid: approximately $6,800
Snowball method order: Credit card A ($5,000) → Credit card B ($8,000) → Student loan ($12,000) → Car loan ($15,000)
- Credit card A paid off in ~7 months (same as avalanche since it is also the smallest)
- All debt paid off in approximately 31 months
- Total interest paid: approximately $7,200
In this example, the avalanche method saves approximately $400 in interest and pays off all debt one month sooner. However, the snowball method eliminates the student loan (third debt) earlier, which some people find more motivating.
| Order | Debt | Balance | Rate | Payoff Month |
|---|
Typical Canadian debt types and their interest rates
Understanding the interest rates on common types of debt helps you prioritize your payoff strategy:
| Debt Type | Typical Interest Rate | Tax Deductible? |
|---|---|---|
| Credit cards (store) | 25% – 29.99% | No |
| Credit cards (major bank) | 19.99% – 20.99% | No |
| Payday loans | 390% – 550%+ (effective annual rate) | No |
| Personal line of credit (unsecured) | 7% – 12% | No (unless used for investing) |
| Car loan | 5% – 9% | No |
| Student loan (government) | Prime + 0% (federal) | Interest is a tax credit |
| HELOC | Prime + 0.50% to Prime + 1.00% | Only if used for investing/business |
| Mortgage | 4% – 6% | Only on rental/investment property |
| Personal loan | 7% – 15% | No (unless used for investing) |
Always prioritize paying off the highest-rate debt first — particularly payday loans and credit cards — as the interest on these compounds rapidly.
How much do Canadians owe?
Understanding average Canadian household debt provides helpful context for your own debt payoff journey:
| Metric | Amount |
|---|---|
| Average household debt (non-mortgage) | ~$21,000 |
| Average household debt (including mortgage) | ~$180,000 |
| Household debt-to-income ratio | ~175% |
| Average credit card balance | ~$4,000 |
| Average car loan balance | ~$23,000 |
| Average student loan balance | ~$26,000 |
Sources: Statistics Canada, Equifax Canada. Figures are approximate and based on the most recently available data.
If your debt levels are above these averages, a structured payoff plan using this calculator can help you take control.
The impact of minimum payments vs. aggressive payoff
Making only minimum payments on debt can keep you in debt for decades and cost far more in interest than the original balance. Here is an example:
| Strategy | $5,000 Credit Card at 19.99% | Time to Pay Off | Total Interest Paid |
|---|---|---|---|
| Minimum payment only (2% of balance) | $100/month initially, declining | ~30 years | ~$8,000+ |
| Fixed $150/month | $150/month | ~4 years | ~$1,900 |
| Fixed $300/month | $300/month | ~1.5 years | ~$850 |
| Fixed $500/month | $500/month | ~11 months | ~$480 |
As shown above, increasing your payment from the minimum to $300/month on a $5,000 credit card saves over $7,000 in interest and gets you out of debt 28 years sooner.
Tax implications of debt interest in Canada
Not all interest is created equal from a tax perspective. Understanding which interest is deductible can influence your payoff strategy:
| Debt Type | Interest Deductible? | Conditions |
|---|---|---|
| Mortgage (primary residence) | No | Not deductible for personal-use homes |
| Mortgage (rental/investment property) | Yes | Must be used to earn rental or investment income |
| HELOC for investing | Yes | Funds must be used to purchase income-producing investments |
| HELOC for personal use | No | Renovations, vacations, etc. are not deductible |
| Investment loan | Yes | Must be used to earn investment income (not capital gains only) |
| Student loan (government) | Tax credit | 15% federal non-refundable tax credit on interest paid |
| Credit cards | No | Never deductible for personal use |
| Car loan (personal) | No | Not deductible unless used for business |
Key takeaway: If you have both deductible and non-deductible debt, focus on paying off non-deductible debt first. The after-tax cost of deductible debt is lower, making it less expensive to carry.
When to consolidate vs. use avalanche/snowball
Debt consolidation involves combining multiple debts into a single loan, often at a lower interest rate. It makes sense in certain situations:
When consolidation makes sense
- You have multiple high-interest debts (credit cards at 19.99%+) and can consolidate into a personal loan or line of credit at 7%–10%
- You are struggling to manage multiple payments and due dates
- You qualify for a balance transfer credit card with a 0% promotional rate and can pay off the balance before the rate expires
- You own a home and can use a HELOC at prime + 0.50% to consolidate (but understand the risks of securing unsecured debt against your home)
When avalanche/snowball is better
- The interest rate on a consolidation loan is not significantly lower than your current rates
- You have only 2 or 3 debts and can manage the payments
- You are close to paying off some debts and want the motivation of quick wins (snowball)
- Consolidation options require fees or longer terms that negate the interest savings
Snowball vs. avalanche method
This calculator supports both the debt snowball and debt avalanche repayment strategies. With the avalanche method, your extra payments are directed toward the debt with the highest interest rate first. Once that debt is paid off, the freed-up payment amount rolls to the next highest-rate debt. This approach minimizes the total interest you pay and gets you out of debt faster mathematically. The snowball method targets the smallest balance first regardless of interest rate. Once the smallest debt is eliminated, you roll that payment into the next smallest balance. While you may pay slightly more in total interest, the quick wins of eliminating individual debts can provide powerful motivation to stay on track.
Both methods require making at least the minimum payment on all debts while directing any extra funds to the target debt. The best method is the one you can stick with consistently. If you have a personal loan, line of credit, or even a mortgage in your debt mix, enter each one into the calculator to see a complete repayment schedule with either strategy.
Related calculators
- Personal Loan Calculator — Calculate payments on a personal loan
- Line of Credit Calculator — Estimate line of credit payments and interest
- HELOC Calculator — See if consolidating with home equity makes sense
- Mortgage Calculator — Calculate your mortgage payments
- Mortgage Calculator With Extra Payments — See how extra payments accelerate mortgage payoff
- Compound Interest Calculator — Understand how interest compounds on your debt
- Investment Calculator — Compare investing vs. paying off debt
- Salary Calculator — Understand your take-home pay for budgeting