What debt should you pay off first?

If you're like many people, you may have to pay different bills each month. These may include things like mortgages, personal loans, student loans, and credit cards.

If you're trying to manage and eliminate multiple debts, it can be helpful to make a plan. Learn more about which type of debt to pay off first, debt repayment strategies, and how reducing debt could help you take control of your finances.

Key Takeaways:

• Debt can become expensive when interest accumulates over time.
• Outstanding debts can make it harder to qualify for other loans and credit cards.
• There are a number of strategies for debt repayment, including the avalanche method and the snowball method.
• Deciding whether to focus first on high-interest debt or eliminating smaller balances can help determine which method might be best.
• Check for pre-approvals to see offers without risk to your credit score.

Getting Started:

It can be helpful to devise a plan to eliminate debt because paying it off over months or years can be costly or even make it more expensive. This is because interest charges can really add up over time.

It can be helpful to start by listing your debts with their outstanding balances, minimum monthly payment, and interest rate. You may also consider some other factors when creating a debt payment plan:

Debt with the highest interest

Highest loan balance

Debt that can reduce your tax bill

When people have debts that could reduce their tax liability, they may decide to pay their other balances first. That way, they could take advantage of tax exemptions.

Debt that most affects your credit score

Debt Payoff Strategies:

Avalanche Method:

Once you pay off the balance with the highest interest rate, you could continue with the "avalanche" by targeting your debt with the next highest interest rate, and so on.

Snowball Method:

Compared to other methods, this may save you less money in the long run. But the "snowball" effect can provide frequent small wins to boost momentum.

Debt Consolidation:

It can be helpful to keep in mind that debt consolidation may involve fees and other costs. That's something to consider and budget for when deciding which debts would be worth consolidating.

Debt Refinancing: