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Why you should pay off priority debts first What are non-priority debts? Get free advice about dealing with debts. The consequences of not paying off some debts before others can be more serious. Back to top. Need someone to talk to about your finances? What are priority debts? Priority debts include:. Join our Facebook group. Why you should pay off priority debts first. Find out more about how to deal with debt issues on the National Debtline website. What are non-priority debts? The consequences of not paying non-priority debts are less serious.
Your non-priority debts include: overdrafts personal loans banks or building society loans money borrowed from friends or family credit card, store card debts or payday loans catalogue, home credit or in-store credit debts. Water and sewerage bills. They're an ongoing service that you need to pay for. Treating creditors fairly. Is your household income getting squeezed?
Check you are receiving all the benefits or grants you might be entitled to. A debt adviser will: treat everything you say in confidence never judge you or make you feel bad about your situation suggest ways of dealing with debts that you might not know about check you have applied for all the benefits and entitlements available to you always make sure you are comfortable with your decision. Three quarters of people who get debt advice feel more in control of their finances afterwards.
Was this information useful? If you are a person that needs more incentive to pay off debt, then stick with the debt snowball method. If devoting money to interest payments—instead of denting principal—drives you nuts, then you might prefer the debt avalanche approach. You can also use a combination of the two methods. Choose a debt that's relatively small a la the snowball method but that carries a high-interest rate for the avalanche approach to tackle first.
If both methods appear insufficient, you may want to consider debt relief instead. Both debt repayment plans are useful and can help you regain financial freedom. Use specialized debt repayment calculators to discover when you will pay off your debt and how much interest you will pay. Student Cards.
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I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Part Of. Consumer Debt Basics. Credit Card Basics. Debt Repayment Options and Advice. Table of Contents Expand. Debt Avalanche vs. Debt Snowball. Debt Avalanche.
Special Considerations. Debt Snowball FAQs. The Bottom Line. Debt Snowball: An Overview Paying off debt is no easy task, especially if you just pay the minimum amount due each month. Key Takeaways Debt avalanche and debt snowball are both types of accelerated debt repayment plans. The debt avalanche method involves making minimum payments on all debt, then using any extra funds to pay off the debt with the highest interest rate. The debt snowball method involves making minimum payments on all debt, then paying off the smallest debts first before moving on to bigger ones.
The debt avalanche method can result in paying less interest over time but requires discipline. The debt snowball method can be more expensive but yields quicker results—valuable for maintaining motivation. Pros Minimizes the amount of interest you pay Lessens the amount of time it takes to get out of debt.
Cons Takes discipline and commitment to pull off Requires constant amount of discretionary income. If you want to consolidate your debt into a single monthly payment, you have a few options.
You could transfer your existing credit card balances onto a balance transfer credit card , many of which come with lengthy 0 percent introductory APR periods. The top balance transfer credit cards offer between 15 and 21 months of 0 percent APR on balance transfers, giving you ample time to start paying off your debt without paying interest on your transferred balance.
You could also take out a personal loan and use that money to pay off high interest debt. Lastly, you might want to consider consolidating your debts through a home equity loan or home equity line of credit. Remember, if you fall behind on your mortgage payments, you run the risk of foreclosure — so think carefully before taking out a second mortgage to pay off other debts. Sign up for a Bankrate account to a nalyze your debt and get custom product recommendations.
How We Make Money. Nicole Dieker. Written by. Edited By Rashawn Mitchner. Edited by. Rashawn Mitchner. Rashawn Mitchner is a former associate editor at Bankrate. Share this page. Key Principles We value your trust. You may also like Debt consolidation with a personal loan. How to use the debt avalanche payment strategy. However, if you recently graduated college and are only making minimum payments on your student loan, you may want to consider making larger payments in order to pay off that debt sooner.
The interest rates you are paying may also determine which debt to pay off first. For example, a credit card with a high APR will take a long time to pay off since interest makes up a big chunk of your minimum payments each month. Once your highest-interest debt is paid in full, put the extra money you used for the paid-off debt toward the card with the second-highest interest rate.
Continue this process until all your debt is paid off. Interest rates are just one factor to consider when deciding which debt to pay off first. It may make more sense to pay off your smallest balances first to build momentum or pay off an overdue balance that might go into collections soon. While the debt avalanche method might save you more money, you may be better off using the "debt snowball" method. Rather than focusing on interest rates, you pay off your smallest debt first while making minimum payments on your other debt.
Once you pay off the smallest debt, use that cash to make larger payments on the next smallest debt. Continue until all your debt is paid off. If you have a small debt, like a few hundred dollars, you might be able to pay this off in a few weeks or a couple of months.
This first win may be the motivation you need to stay the course and pay off your remaining debt. Sometimes the debt you pay off first has nothing to do with interest rates or tax breaks. Instead, it could be solely based on how the debt makes you feel.
If you have outstanding medical debt, that may get your attention over other types of debt. Payday loans , which require payment by your next payday and tend to charge exorbitant interest rates and fees, might be taking a toll on your emotional health.
In that case, try to pay off those loans as soon as possible.
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