when paying off debt, what should i pay off first


The order that you do things matters. Have you ever brushed your teeth, and then tried to eat an orange? Didn’t taste very good did it? That’s because the order of doing those two activities mattered– it would have been better to eat the orange first and then brush your teeth. At least, the orange would have tasted better in that instance. Similarly, the order that you pay off debt matters. It can impact how much money you’ll end up wasting trying to pay off debt and how quickly you’ll pay it off. Which, depending on what you do, can leave a bad taste in your mouth. It will also impact how motivated you feel and whether you’ll be able to keep going and get it paid off once and for all. 

If you’re wondering when paying off debt, what do I pay off first– the short answer is, you want to pay off your highest interest earning debt first. But it can play out a little more complicated, so let’s discuss:


When paying off debt, if your is to save the most money possible on your debt, you should pay off any high interest debt first. That usually means debt like payday loans and or credit card debt. High interest debt is typically considered anything over 9-10%. 

Pay day loans can have as high of interest as high as 600% according to CNBC, making them practically impossible to pay off, which is why their considered predatory loans, at least in the U.S. 

The average interest rate on most credit cards hovers around 17.8%– which may seem small compared to the astronomical rates of pay day loans, but can also wind borrowers up in a trap of making minimum payments, where borrowers end up paying 100x the cost of their credit card purchases.

If you have pay day loans or credit card debt balances that aren’t paid off, start paying those off first.

It’s not just pay day loans and credit card debt that can have high interest. Other debt certainly can as well. So, if you’ve got debt above 9% in interest, start chipping away at that debt immediately. 

Another thing you may consider when you are deciding what debt to pay off first, is whether you can do a balance transfer of your credit card debt to a 0% interest rate or take on a personal loan to consolidate your debt for a lower interest rate. I personally like the idea of using a personal loan to consolidate debt for a lower interest rate. You take out the loan and use it to pay off your other debt, then you have one payment to the lender for your personal loan rather than paying off several credit cards or other debts which makes it easier to manage as well as lowers your interest rate significantly. You can compare multiple interest rates from multiple lenders for a personal loan here (with no impact to your credit score btw). 


After you’re finished paying off your high interest debt, or, once that debt is consolidated into lower interest debt, you get to make a choice on what debt repayment method will work best for you. There are plenty of debt repayment methods to help you decide what debt to pay off first (after your highest interest debts have been paid. Those should always be paid off first). So, while you continue making your minimum payments on all of your debt balances, you will make extra payments on one of your accounts, depending on what method you choose. 

Debt Avalanche.

After you’ve paid off your highest interest debts first, you can continue on by paying off your next highest interest balance. This is commonly called the debt avalanche method, where you focus on getting rid of debt balances based on their interest rates. You will almost certainly pay less money in interest by choosing the debt avalanche method, which is why it’s my favorite method of debt repayment. 

Debt Snowball.

Another option for debt repayment is the debt snowball method, where you pay off your smallest balance debt first and then move on to your higher debt balances. The idea is that paying off the smaller balances will give you the motivation you need to pay off the bigger balances. This is well supported in social psychology, however, this method will actually cost you more money than paying off your highest interest debt first– which you certainly should keep in mind in deciding which repayment method is right for you. I typically recommend that you start out using the Debt Avalanche method then switch to Debt Snowball if you find yourself lacking motivation to get it paid off. 

Worst Debt. 

The Worst Debt Method is a method of debt repayment where you pay it off based on how much the debt balance bothers you. Say for example, you took on a personal loan to pay for an engagement ring and your fiancé ended up calling off the wedding but kept the ring. Now you are stuck with paying off the debt with no fiancé to show for it. That debt would probably bother you a lot. The more it bothers you, the higher priority it is to pay off. 

Debt Type.

Lastly, you may want to consider paying off your debt by the type of debt it is. Here are some examples of different types of debt:

  • Credit card debt. 
  • Home equity line of credit or a home equity loan. 
  • Personal loans. 
  • Loans from family members or friends. 
  • Auto loans. 
  • Student loans. 
  • Mortgages. 

You could simply choose the type of debt you want to pay off next and then continue on, paying it off by the type of debt that it is. 

Paying off debt is doable. It certainly matters what debt you pay off first but it’s nothing to stress over. If you pay off your highest interest accruing debt, like credit cards, first, you’ll save the most money and get out of debt faster. That’s the first step. After you’ve paid off your highest earning interest debt, choose one of the above debt repayment methods that best suits you, and you’ll be out of debt in no time. 

Ready to get started paying off debt? Grab our FREE guide– the Debt Payoff Starter Kit. We’ll walk you through how to start your debt free journey, including a free printable so you can easily track your debt and knock it out of the park. 


what debt to pay off first

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