New Year’s resolution 2027: take stock of your debts in 4 steps

Write each debt on one line, with four pieces of information: the balance, the interest rate, the monthly payment and the end date, if there is one.

Don’t forget the debts we tend to forget:

• store cards and “buy now, pay later” purchases;
• the line of credit, even if you “almost never” touch it;
• the car loan or a long-term car lease;
• personal loans, including those from a relative;
• taxes owed to the Canada Revenue Agency (CRA) or Revenu Québec.

The rate is on your statement or your contract.

According to Protégez-vous², the going rate on a credit card is between 19% and 21%. If one of your debts is above that, highlight it.

For each debt, take the two figures noted in steps 1 and 2: the balance and the annual rate. The calculation is done in two stages.

1. The year’s interest = balance × annual rate. Example: $6,000 on a card at 19.99% → $6,000 × 19.99% = about $1,199 in interest a year.

2. The month’s interest = the year’s interest ÷ 12. Example: $1,199 ÷ 12 = about $100 in interest a month.

It’s an approximation: banks calculate card interest every day, and the balance changes from one month to the next. But the order of magnitude is right, and that’s what matters for taking stock.

Then compare that interest with your monthly payment, meaning the amount you actually pay each month, shown on your statement or contract.

3. The share of the payment that goes to interest = the month’s interest ÷ monthly payment. Example: you pay $180 a month on this card → $100 ÷ $180 = about 56%. In other words, of each $180 payment, about $100 pays the interest and only $80 actually reduces the debt.

Here is the complete illustrative example of a household with four debts:

This table reveals three things:

1. This household pays about $3,900 in interest a year, or $325 a month.
2. Of $920 in monthly payments, 35% goes to interest, more than a third.
3. On the two cards, half the payment or more only pays the interest. Those are the debts that “never go down.”

Do the same calculation with your own numbers. The total of the month’s interest and the share going to interest are often the most telling figures of the whole exercise.

A basic rule: keep paying at least the minimum on all your debts, to avoid fees and damage to your credit file, meaning the record of your repayments that lenders look at. Then put every extra dollar toward a single debt. Two methods have proven themselves:

• The avalanche method: you repay the debt with the highest rate first, here the store card, then the credit card. It’s the method that saves the most interest.
• The snowball method: you repay the smallest balance first, here again the store card ($2,000), then the credit card ($6,000). Quick wins help you stay motivated.

When a debt is repaid, its payment is added to the next one, and the effect speeds up.

Your review gives you a clear picture of the situation. Depending on what it shows, several paths are possible:

• If the interest stays reasonable, the repayment plan from step 4 and a tight budget may be enough.
• If a large part of your payments goes to interest, it’s worth exploring other options. For a homeowner, bringing high-rate debts into the mortgage (that is, increasing the mortgage loan to repay your other debts and having just one payment, at a lower rate) can reduce monthly payments. But stretching out the repayment period can also increase the total interest paid: each situation has to be looked at case by case. See our page on debt consolidation.
• If the situation seems unmanageable, the ACEFs (family economics cooperative associations), which are community organizations, offer free, confidential budget consultations across Quebec. 211 (opens in a new tab) will point you to the nearest one.

Your debts also affect your borrowing capacity, meaning the amount a lender would agree to lend you: our article on how to determine your borrowing capacity explains how lenders take them into account.