Prioritizing How You Repay Debt

Prioritizing How You Repay Debt

Prioritizing how you repay your debt is essential since it can impact how efficiently and quickly you become debt-free. It could also affect the ease in which you maintain your financial motivation. Having a well-organized priority list can not only help you to save money and time but also ensure you stay motivated to repay your debt.

Make a List of Your Debt

First, you'll want to list all your debt, such as:

  • Student loans
  • Mortgage
  • Title loan
  • Car loan
  • Business loan
  • Credit card balances
  • Payday loans

Not only list them, but write down the amount you owe, the monthly payment, the interest rate, and if the loan is current, in default, or late.

Strategies for Debt Repayment

Here are four strategies for prioritizing how you repay your debt:

  1. Pay High-Interest Rate Debt First

    Prioritizing your debt by annual percentage rate (APR) is essentially the best strategy. If you pay off your debts with the highest APR first, you will save money overall. High APR debts accrue higher monthly interest fees. Therefore, the more you allow the debt to linger, the more it will cost you.
  2. Pay Small Balances First

    If your high APR debt is your highest balance, it can take some time for you to pay it all off, and this could cause you to lose motivation and decide to just stay in debt.

    That is not good, so you may want a different strategy. Instead, you might want to start with your smallest balances first. Tackling your small balances are quick wins and can help keep you motivated to tackle your larger debts.
  3. Pay Your Largest Balances First

    There may be some situations where you will want to pay your largest balances off first, such as:

    • Your largest balances are on a 0% promotional period, and you will want to pay it off before the promotion ends.
    • Part of your balance has a high APR since you used a special type of transaction like a cash advance.
    • You are paying a joint account off from a divorce decree to allow you to close the account.
    • The larger balance is harming your credit score since you are using over the 30% available credit limit.
  4. Pay All Your Balances Off At Once with Debt Consolidation

    If you cannot pay off your debt within five years or have high rate loans that are making it difficult, you might consider debt consolidation. In some cases, individuals consolidate debt because it is difficult keeping track of a handful of payments and their due dates.

    Debt consolidation is where you take all your debt and roll it over into a single loan. When individuals talk about debt consolidation, it's usually because they can get a lower monthly payment or lower overall interest rate.

    One common way of consolidating debt is rolling your current credit card balances over onto a single credit card with a low-interest rate (often 0% APR for a specific period). You can save hundreds or thousands of dollars on interest if you pay the balance off before the 0% APR expires.


Ultimately, success in repaying your debt will come down to knowing your options, setting priorities, and deciding on the right strategy. With a little bit of diligence, organization, and persistence, you will soon become debt-free.