What are the Most Common Debt Repayment Strategies?

Exploring the Most Prevalent Debt Repayment Methods

Taking charge of your financial well-being can be a liberating experience. Let’s embark on the journey of understanding how to successfully overcome your debts.

Step 1: Arrange Your Finances

Before you move ahead, it’s crucial to understand your financial obligations, who you’re indebted to, and the due dates. Gather all your loans, invoices, and fixed expenditures. Take note of the interest rates and monthly installments, then calculate the total sum of your debt.

It’s also advisable to compile all your outlays and compare them to your revenue. This gives you an insight into the amount of money you can dedicate towards debt repayment every month. A budget planner can be a helpful tool in creating a fundamental budget.

With all the information consolidated, you’re now prepared to select a debt repayment strategy.

Step 2: Choose a Debt Repayment Plan That Fits Your Needs

Different strategies offer different outcomes. What’s effective for one person may not be the same for another. The crucial aspect is making your payments consistently to avoid late fees while reducing the principal over time. This necessitates paying more than the minimum amount.

When you make a payment, it’s allocated towards interest first. If the principal doesn’t decrease, you end up in a cycle of paying interest without ever lessening your debt.

If you’re struggling to manage or keep up with payments, consider a debt consolidation loan to decrease the number of minimum payments you need to make each month, or contact a Licensed Insolvency Trustee for debt assistance.

Once you’re at a stage where you can start to pay more than just the minimum payment on one of your debts, here are some common debt repayment strategies:

Strategy 1: Debt Avalanche

This method can be the quickest, but it also presents challenges.

A significant portion of your monthly budget is dedicated to debt repayment, paying all your minimums first, and the rest towards the debt with the highest interest rate. Once that debt is paid off, you shift to the debt with the next highest interest rate until all your debts are cleared.

The first debt you target will likely take the longest to pay off, so you may not see immediate rewards. However, perseverance makes it worth it. If you stick to it, the debt avalanche becomes easier and quicker after each debt.

Strategy 2: Debt Snowball

If consistent progress motivates you, this method might be suitable for you. It’s based on building momentum over time. You begin by allocating your monthly debt repayment budget towards minimum payments, then paying the remaining towards the smallest overall debt.

In this strategy, you focus on the size of the balance rather than the interest. You start off with a sense of achievement as you tackle the smallest debts first. As you move onto larger debts, you’ve already established debt repayment habits and learned what works best for you. Moreover, every time you repay a debt, everything you were putting towards the minimum monthly payment can now go towards paying off your next one.

The primary drawback to the debt snowball is that the total time and money spent will likely be higher than when targeting high-interest loans. But this might be a worthwhile trade-off if it keeps you motivated.

Strategy 3: Debt Snowflake

This method can complement any other technique. Based on accumulation, it aims to increase the amount of money you’re putting towards your debts. Essentially, you’re using every small amount of money you find, save, or earn outside of your normal budget to put towards your debt.



  • You find change on the ground.
  • You sell something.
  • You save some money by packing a lunch.
  • You make extra cash doing odd jobs.
  • You pay less than expected for something.


It all contributes to your next debt payment. Whether you choose to collect it in a jar or bank account is your choice, but what’s important is dedicating these funds to debt as soon as they become available.

Strategy 4: Budget Overhaul

When your finances don’t allow for a debt repayment strategy, reconsider your budget.

Start by calculating how much you need per month for the absolute essentials, then before moving onto anything else, add up exactly how much you need to make all your minimum debt payments. Now add a little extra to pay down the principal on one of your debts.

Distribute whatever monthly income is left towards non-essentials. You’re structuring your budget around debt repayment. It may require some major cutbacks or temporary sacrifices, but it may also highlight unnecessary spending.

Clearing a debt will provide more cash for restoring something you cut out or paying back the next debt faster. If you need assistance, consider debt counselling to learn how to tailor a budget to your needs.

Step 3: Overcoming Debt in a Challenging Economy

Between inflation reducing the value of every dollar and supply chain disruptions increasing the price of goods and services, the cost of living is rising. How does this factor into you getting out of debt?

An economic downturn makes budgets tighter, but also more critical. When every dollar counts, you need to track your spending to make difficult financial decisions. If possible, now is the time to start an emergency fund that can safeguard your budget from unexpected expenses.

The key takeaway should be that in a challenging economy, the less debt you have, the more you can focus on protecting yourself and your family from rising costs. This makes it more important than ever to have a specific debt repayment strategy.

If you’re having difficulty managing your debts, schedule your free consultation with a Bankruptcy Canada debt professional near you.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.