3 Tips for Choosing Which Debt to Pay Off First

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3 Tips for Choosing Which Debt to Pay Off First

Tips for choosing which debt to payoff first

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When you are working on becoming debt free, there’s a lot to think about. Here are 3 key points to consider when deciding which debt to focus on paying off first.

When you are feeling overwhelmed, often you don’t sit down to see what is the most important debt to focus on paying off. It is easy to feel so busy, stressed, exhausted and just drained of your brain power to be able to spend the time and energy to figure this out. I get it.

First off, when I say which debt to focus on paying off first, I do not mean to stop making any of your required debt payments, whether monthly or otherwise. You always need to be making all of your debt payments. What I am talking about though, is figuring out which one to concentrate extra effort on paying off sooner.

There are a few different things to think about. It is never a one size fits all approach because everyone’s specific circumstances are different, so I am going to give you some information, so you can apply it to your situation to make the decision.

These three tips are the questions that I use for my one on one financial coaching clients, to help them when they are deciding which debts to focus on paying off first. It has made a world of difference in helping to lower their feelings of overwhelm, and gives them a solid place to start.

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Here are 3 different ways to approach deciding which debt to focus more effort on paying off first.


1) What debt are you paying the highest interest rate on?

First things first, get organized. You will want to go through and write down on a piece of paper (and not on a scrap piece of paper that is easily going to get lost, a journal would be preferable) all of the specific debts that you have, who they are to and then the corresponding interest rates for each. Write down all of the loans that you have including each credit card (list them individually), student loans, lines of credit, vehicles, mortgages, etc.

If you do not know your interest rates, you can check on a recent statement and it will be written on there. If you can’t find a printed statement, go into your online accounts and click on a past statement (it will be the same as what you used to receive in the mail except that it is the digital copy). You can check it or download it and check it. If you can’t find it from


Click here to download my Realistic Budget template! 

either of these options, you can call your loan providers as well and they can help you out.

When you know what the interest rates are for your debts, then you can clearly see which one is costing you the most amount of money in interest and which is costing you the least. The highest interest rate debt may be the one that you want to focus on paying off first because you are paying more in interest on this one than your other debts.

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2) What debt has the lowest balance?

Picking the lowest balance to concentrate on paying off first is helpful, because you feel a huge sense of relief as that debt can be paid off quicker. It helps you to gain momentum and confidence and it seems more “real” because it is happening quicker than your other, higher debts. This can help to relieve feelings of anxiousness because you are owing on one less debt. It can also help you to stay more focused on your repayment because the timeline for this goal is quicker, so you feel more focused and committed. Paying off your debt feels more achievable and timely.


Click here to download my Realistic Budget template! 

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3) What debt is causing you the most anxiety?

Which one really makes you feel the sickest, gives you stomach pain and might even make you feel ashamed or embarrassed? If you have a debt that is really wearing down your mental and physical health, then you may want to consider focusing on making this one the priority. And when I say priority, I don’t mean to you put all of your money towards this one and not pay your other debts, you always need to be making all of your debt payments. Ones that commonly fall under this kind of debt are typically debts owed to family members or people you may know, but they can also be all different kinds of debt such as credit card, lines of credit, student loans, etc.

After you have chosen which debt to pay off first and you have paid that debt off, you don’t have to continue to follow the same strategy, you can change it up to whatever works best for you! This makes it easy to stick to your payment schedule of accelerated debt repayment. If you want to start with the debt that has the lowest interest, pay it off and then go to the highest interest one, that is perfectly fine! If you want to start with the one that causes you the most guilt and anxiety, then went to the lowest interest one, that’s fine too! Assess your situation and do what feels the best for you to get your debt paid off faster!

Click here to download my Realistic Budget template! 

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Do you have any questions? Leave me a comment and I will respond back to you!


Tips for choosing which debt to payoff first


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