Trying to pay off high interest debt in Canada can feel like running on a treadmill – exhausting, endless, and going nowhere fast. Between credit cards, payday loans, and personal lines of credit, many Canadians are trapped in a cycle of debt where most payments barely touch the principal. So how do you pay off high interest debt and actually get ahead?
At Spergel, we’ve helped over a hundred thousand Canadians break free from debt – and in many cases, a consumer proposal or bankruptcy has been the best and fastest way forward. In this guide, we’ll walk you through your debt relief options, including how legal debt solutions can help you eliminate high interest debt for good.
What counts as high interest debt?
High interest debt includes any debt with an annual interest rate above 10-12%. The most common types of high interest in Canada include:
- Credit card debt (often 19–29% APR)
- Payday loans (up to 400% APR)
- Store credit cards and buy-now-pay-later services
- Unsecured personal loans with subprime rates
Because of compound interest, these debts grow quickly – and even regular payments can feel like you’re just treading water.
Why high interest debt is so hard to pay off
Even if you’re making payments, the majority of your money may be going toward interest, not the debt itself. Here’s what that looks like:
$10,000 in credit card debt at 24% APR =
→ Over $2,400 in interest per year if unpaid
→ Making only the minimum payment? It could take over 20 years to pay off
This is why many Canadians struggle. Even if you’re being responsible, the math is working against you.
How to pay off high interest debt in Canada: your options
If you’re struggling with debt that’s growing faster than you can pay it down, you’re not alone. From credit cards to payday loans, high interest debt is one of the most common – and most stressful – financial challenges Canadians face. The good news? You do have options. Whether you want to try paying it off yourself or need professional support, here are the most effective ways to tackle high interest debt in Canada.
1. Debt avalanche method: pay off highest interest first
This DIY approach involves:
- Listing all debts from highest to lowest interest
- Making minimum payments on all
- Putting any extra money toward the debt with the highest interest rate
This method saves you the most on interest, although it does require consistent extra income and discipline.
2. Debt consolidation loan
This means combining multiple high interest debts into a single lower-interest loan – often through a bank or credit union. This can:
- Simplify your finances
- Reduce your monthly payment
- Lower your overall interest rate (if approved)
It’s important to note that for this method, you’ll need a good credit score, and it doesn’t reduce the amount you owe — just reorganizes it.
3. Balance transfer credit card
Some cards offer 0% interest for 6-12 months if you transfer your balances. If you can pay off the balance during the promo period, this can help you save on interest.
But:
- There’s usually a balance transfer fee (2–4%)
- You’ll face high interest if you don’t repay in full
- Requires a strong credit score to qualify
4. Boost your income and cut expenses
This can include:
- Freelancing or gig work (e.g. rideshare, delivery, online tutoring)
- Selling unused items
- Cutting non-essential spending
This approach takes time and willpower – but every extra dollar can go toward crushing high interest debt.
5. File a consumer proposal – cut your debt by up to 80%
If you’re overwhelmed by high interest debt, a consumer proposal may be your best option. It’s a legal, government-regulated program that allows you to:
- Settle unsecured debts (like credit cards and payday loans) for less than you owe
Freeze all interest immediately
Keep your assets (home, car, RRSPs)
Make one low, affordable monthly payment
Unlike consolidation loans or balance transfers, a consumer proposal actually reduces what you owe, not just how it’s structured. And your credit score can start rebuilding right away.
6. Consider bankruptcy (when you have no other option)
Sometimes, bankruptcy is the most realistic solution – especially if:
- You have little or no income
- You’re facing lawsuits or wage garnishments
- Your debts far exceed your ability to repay
Bankruptcy is a legal process that eliminates most unsecured debts and gives you a fresh start. It may sound scary – but with the right support from the right team of expert Licensed Insolvency Trustees, it can be life-changing.
Real life success story: How Jennifer escaped the debt trap
Jennifer, a single mother from Ontario, found herself overwhelmed by multiple debts totalling over $46,000. Despite her best efforts, the high interest rates and mounting bills made it impossible to keep up. She felt trapped and uncertain about her financial future.
After reaching out to Spergel, Jennifer worked with an expert Licensed Insolvency Trustee who recommended a consumer proposal. Through this process, her debt was reduced to $11,600 – a saving of nearly 75%. This allowed her to make manageable monthly payments and avoid bankruptcy.
With Spergel’s support, Jennifer regained control of her finances, reduced her stress, and began rebuilding her credit. Her story is a testament to the power of seeking professional help and taking proactive steps toward financial freedom.
Learn more about Jennifer’s journey to debt relief.
Why trust Spergel to help you pay off high interest debt?
Choosing the right help is just as important as choosing the right solution. When it comes to paying off high interest debt in Canada, here’s why Canadians have trusted Spergel to guide them to a fresh start for over 35 years:
- 💼 Licensed Insolvency Trustees – the only professionals in Canada legally allowed to file all forms of debt relief (including consumer proposals and bankruptcies)
🇨🇦 Proudly Canadian – 35+ years of helping people from all walks of life
❤️ Non-judgmental, compassionate service – you’ll always speak to a real person who wants to help, not just process paperwork
📍 Local offices across Canada – and virtual appointments available too to suit you.
How to pay off high interest debt in Canada: FAQs
Here are some of the most common questions we receive about how to pay off high interest debt in Canada:
What happens to unpaid debt after 7 years in Canada?
In Canada, most unsecured debts are subject to a statute of limitations, which varies by province but is commonly 2 years for legal action (e.g. Ontario, B.C.). Credit bureaus, however, typically remove unpaid debts from your credit report after 6 to 7 years from the date of last activity. This means the debt may no longer affect your credit score, but you still legally owe the money unless it’s been discharged through bankruptcy or a consumer proposal. Creditors may continue to contact you, but they usually can’t sue or garnish wages once the limitation period has passed.
How do I get my debt written off in Canada?
To get your debt written off in Canada, you typically need to go through a formal, legal process. The two main options are:
- Consumer proposal – a Licensed Insolvency Trustee helps you negotiate with creditors to repay only a portion of what you owe. The rest is legally written off. This is a popular option if you want to avoid bankruptcy and keep your assets.
- Bankruptcy – if you can’t afford to repay your debts, filing for bankruptcy can eliminate most unsecured debts entirely. Once discharged, those debts are legally written off.
Outside of these legal options, creditors rarely “forgive” debt unless it’s uncollectable – and even then, you may still face collection calls or credit damage.
What is the best way to get rid of high interest debt?
The best way to get rid of high interest debt depends on your financial situation. If you can manage it yourself, options like the debt avalanche method (paying off the highest-interest debt first), debt consolidation loans, or balance transfer credit cards may help reduce interest and simplify payments. But if you’re overwhelmed or only making minimum payments, the most effective solution may be a consumer proposal. This legally reduces your debt (often by up to 80%) and stops interest immediately – all while letting you keep your assets. In more severe cases, bankruptcy may be the best path to a fresh start. Speaking with a Licensed Insolvency Trustee is the best way to explore your options and find the right solution for your needs.
Is 5% considered high interest debt?
In most cases, 5% is not considered high interest debt. It’s relatively low compared to common forms of unsecured debt in Canada, such as credit cards (19–29%) or payday loans (up to 400%). A 5% interest rate is more typical of a mortgage, car loan, or government student loan. While it’s still important to manage, this kind of debt is generally not urgent to pay off compared to higher-interest obligations.
Should you always pay off high interest debt first?
In most cases, yes – you should prioritise paying off high interest debt first. This strategy, often called the debt avalanche method, helps you save the most money over time by reducing how much you spend on interest. It’s especially effective for things like credit card debt, payday loans, and other high-interest borrowing. There are exceptions, however. If you’re falling behind on essential payments (like rent or utility bills), or if your high interest debt is unmanageable, it may be better to explore professional debt relief options, like a consumer proposal, rather than trying to handle it alone.
Get out of the high interest debt cycle – for good
If you’re wondering how to pay off high interest debt in Canada, remember: you don’t have to do it alone. A consumer proposal or bankruptcy could be your fastest, most affordable path to financial freedom. Book your free consultation today with a Licensed Insolvency Trustee at Spergel. We’ll review your options and help you choose the best path forward – with zero pressure and no upfront cost.