The most common debts for newcomer families
- Mortgage — usually the largest obligation. Accelerated payments can shorten amortization by years.
- Credit card debt — typically 19–22% interest. The highest priority to clear.
- Car loan — 4–9% depending on lender and credit history.
- Student loans — government student loans in Canada are now interest-free. Private loans vary.
- Personal line of credit — rates vary; often used as a short-term buffer but can become a trap.
Two proven payoff strategies
Avalanche (mathematically fastest)
List all debts by interest rate, highest first. Pay the minimum on everything except the top-rate debt, where you direct all extra dollars. Once it's gone, move the freed-up payment to the next on the list.
Snowball (psychologically motivating)
List debts by balance, smallest first. Pay extra on the smallest balance regardless of rate. Each cleared account builds momentum. Slightly slower in interest cost, but higher completion rates for many people.
Debt vs. investing: how to decide
A general guide: if your debt interest rate is higher than the expected after-tax return on your investment, pay the debt first. Credit card debt at 20% is almost always a higher priority than contributing to a non-registered account. RRSP contributions can still make sense alongside low-rate debt because the tax refund effectively lowers the cost of the loan.
The right balance depends on your specific rates, income, and goals — that's what the free review is for.
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Book my free review →Frequently asked questions
Should I pay off debt or invest?
It depends on the interest rate. High-interest debt like credit cards (often 19–22%) should almost always be cleared before investing in non-registered accounts. Mortgage debt at 4–6% may be worth balancing against RRSP or TFSA contributions, especially if your employer matches.
What is the avalanche method?
The avalanche method directs extra payments to the highest-interest debt first while paying minimums on the rest. Mathematically it minimizes total interest paid.
What is the snowball method?
The snowball method clears the smallest balance first regardless of interest rate. Each paid-off account gives a psychological win that motivates continued progress.
How does life insurance relate to debt?
If you die with debt outstanding, that obligation doesn't disappear — it must be settled from your estate or can fall to a co-signer. Term life insurance sized to cover your key debts (especially the mortgage) ensures your family isn't forced to sell assets to cover what you owed.
This page is for general educational purposes only and does not constitute personalized financial, tax, legal or accounting advice. Debt strategies are illustrative — verify interest rates, tax implications, and terms with your lender before acting. Neelesh Kumar is a Licensed Life & Health Insurance Agent regulated by FSRA — verify at fsrao.ca. © 2026 Wealthready · FinanceWithNeelesh · Kitchener, Ontario.