Debt Management

How Can I Prioritize Repaying Multiple Debts?

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In this article

How can I prioritize my debt payments? Try these two strategies if you’re juggling multiple debts and unsure how to get started on repayment. [Duration- 2:14]


  • Interest charges can make carrying multiple debts very expensive. So, it's important to know how to prioritize your repayment efforts.
  • Popular strategies for tackling multiple debt payments include prioritizing debts by their interest rate or balance size. Debt consolidation is another common option.
  • Once you've decided how to prioritize your debts, you can take steps to update your budget and put your plan into action. Freeing up income in your budget may help you pay down debt more quickly.

From student loans to credit cards, your debts can pile up fast. Learning to prioritize multiple debt payments is a critical step toward financial security.

Why prioritizing debt payments is important

Why should you tackle your debt head-on by prioritizing your repayment efforts? Carrying debt can be very expensive, as most credit accounts include interest charges. Expressed as a percentage, interest is the price you pay to borrow money. Credit cards, for instance, can have interest rates as high as 30%. Even low-interest debt, such as mortgages and federal student loans, can be costly over a long enough period.

Having multiple debts owed to different lenders can also prolong your repayment process, which typically costs you more in interest. So, it's critical to know how to prioritize your payments to better manage what you owe.

Strategies to prioritize your debt payments

There's no one-size-fits-all solution for prioritizing your debt payments. So, it's important to find a strategy that fits your unique debt load and financial goals. Some of the most popular strategies include the following:

  • Prioritizing debt by interest rate. This repayment strategy, sometimes called the avalanche method, prioritizes your debts from the highest interest rate to the lowest. First, you'll pay off your balance with the highest interest rate, followed by your next-highest interest rate and so on. As you work your way down the list, be sure to continue making the required minimum payments on all accounts.

    The avalanche method can save you both money and time. Chipping away at your priciest debts first reduces what you'll pay in interest in the long run. In turn, you can use the savings to help pay down what you owe and speed up the repayment process. However, this method also requires patience. If your debt with the highest interest rate also happens to be your largest balance, it could take time for you to see progress.
  • Prioritizing debt by balance size. This strategy, also called the snowball method, prioritizes your debt payments from smallest to largest. You'll continue to pay the minimum on all of your debts while focusing the majority of your repayment efforts on your debt with the smallest balance. Once your smallest debt has been paid off completely, you'll then target your next-smallest debt. Repeat this process until you've paid every outstanding balance in full.

    The snowball method can help build motivation for borrowers with many small debts. However, if your larger debts have the highest interest rates, this strategy may cost you more in total interest payments over time.
  • Consolidating debt into one payment. Consolidating your debts allows you to combine multiple existing debts into a new debt with a single payment. There are many ways to consolidate your debt. You might choose to consolidate credit card debts by opening a balance transfer credit card, or you might opt for a debt consolidation loan.

    Debt consolidation can be particularly beneficial if you're able to qualify for a lower interest rate or other improved terms on your new, consolidated debt. However, for many consolidation options, such as balance transfer credit cards, the introductory interest rate is temporary and may increase significantly after a certain period of time. There may also be balance transfer fees and other up-front costs associated with consolidation.

Debt payment next steps

Once you've decided how to prioritize your debt payments, you can update your budget and put your plan into action. This process can be broken down into several steps.

  • Identify and organize your debts. The first step in repaying your debts is to take stock of where you are now. Create a list of your existing debts and track your outstanding balance, interest rate, required minimum payment, billing period and other important details for each account. It is also helpful to gather any physical statements in one place.
  • Create an updated budget. Next, turn your attention toward creating a budget. Tally up your monthly income and expenses. You can further categorize your expenses into mandatory costs, such as rent and groceries, and optional (also called discretionary) costs, such as entertainment and hobbies.

    With your budget outlined, review your optional costs and look for places where you can cut down spending. Excess income should be used to pay down your outstanding debt.
  • Allocate your income according to your debt repayment plan. Finally, use your chosen method of prioritizing debt to help allocate your monthly earnings toward repayment. First, you'll need to cover your necessary expenses, including any required minimum payments for what you owe.

    Next, earmark a portion of the remaining funds for debt repayment. For example, if you've adopted the avalanche method your funds will primarily go toward your debt with the highest interest rate. If there's any money left over in your budget, you can use it for savings and discretionary costs.

It's important to stay flexible during the debt repayment process, so be prepared to adjust your priorities as needed. But remember, getting rid of debt is your primary goal. By sticking to your budget and staying true to your prioritization plan, you can take better control of your financial future.

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