Once you're carrying balances on more than one card or loan, there are really only two levers: how much you pay each month, and in what order. Consolidation adds a third, the rate. This lesson walks through one household's numbers each way.
The example household
Here's the household's debt, with typical rates for each kind. The figures are estimates for illustration.
| Debt | Balance | Rate | Minimum |
|---|---|---|---|
| Store card | $3,000 | 29.99% | $90 |
| Visa | $1,500 | 19.99% | $45 |
| Line of credit | $9,000 | 9.5% | $180 |
| Total | $13,500 | $315 |
They decide they can put $615 a month toward debt: the $315 in minimums plus an extra $300. They pay every minimum each month, and the question is where the extra $300 goes. As each debt is cleared, its payment rolls on to the next one.
The avalanche: highest rate first
The avalanche sends the extra money to the debt with the highest interest rate, here the store card at 29.99%, then the Visa, then the line of credit.
The store card is gone in about 9 months, the Visa by month 12, and everything is paid off in about 25 months, with roughly $1,840 in interest.
Because it attacks the most expensive debt first, the avalanche almost always costs the least.
The snowball: smallest balance first
The snowball sends the extra money to the smallest balance first, regardless of rate. Here that's the Visa, then the store card, then the line of credit.
The Visa is gone in about 5 months, the store card by month 13, and everything is paid off in about 26 months, with roughly $1,960 in interest. That's about a month longer and $110 more than the avalanche.
So why would anyone choose it? Because a debt fully paid off, early, is motivating. Plenty of people find the quick win is what keeps them going. A method you'll stick with may matter more than a method that's slightly cheaper on paper.
The baseline: minimums only
If the household paid only today's minimums, with no extra $300, it would take about 64 months and roughly $6,500 in interest. The extra $300 a month, whichever order it goes in, saves roughly $4,600 to $4,700 and more than three years.
Try it
Race the three approaches
The same three debts from the table above. Pick an approach and see when each debt is cleared. Every bar keeps its colour whichever order it's paid in.
- Store cardpaid off in 9 months
- Visapaid off in 12 months
- Line of creditpaid off in 2 yr 1 mo
Debt-free in
2 yr 1 mo
Total interest
$1,844
Compared with minimums only
$4,678
less interest
At $300 extra, the avalanche costs about $113 less interest than the snowball.
Consolidation: changing the rate
Consolidation means moving several debts into one at a lower rate, for example with a balance transfer card, a consolidation loan, a line of credit or, for homeowners, a refinance or home equity line of credit.
Suppose all $13,500 moved to a line of credit at 9.5% and the household kept paying the same $615 a month. It would be cleared in about 25 months with roughly $1,390 in interest, the lowest of all.
Two catches matter more than the arithmetic. First, the saving depends on keeping the payment up. If the lower rate is used to drop the payment to the new minimum, the debt can take much longer and cost more. Second, consolidation pays off the cards but doesn't close them. If they fill up again, there are now two sets of debt instead of one.
Rolling debt into a mortgage brings the lowest rate of all, but it also spreads short-term spending over a 25-year amortization and secures it against your home. Our guide on how to consolidate debt in Canada walks through each option with its fine print, and the debt consolidation calculator lets you test your own figures.
Where to go next
Every one of these options, from a new card to a refinance, depends on your credit. The next lesson covers credit scores and a simple budget.
Worked figures are estimates based on the example inputs shown, checked October 11, 2026. Rates, rules and lender policies change, and your own numbers will differ. This is educational information, not financial advice.