Paying off your debt quickly is important. You don’t want loans and debt hanging around forever and just collecting interest - that’s an easy way to lose more money than you need to. While paying off any of your debt or loans is a good thing, and certainly helpful to your budget and financial goals, how do you decide what debt to pay off first?

You certainly don’t want to just pick a debt to pay off at random, and the order in which you do pay off your debts can have substantial impact on the money you save and how quickly you are out of debt. Because there are multiple things to consider when planning your debt pay-off budget, we’ve listed some pointers below for you to consider that may help guide you in the right direction. Every financial situation is different and the path you choose should be determined by your unique position and needs.

Should I Pay Off My Small Debts First?

Making the decision as to where you should start paying off your smaller debts first is dependant on a few different factors:

• How much debt you have
• How much interest you are paying on our higher debts
• How much money will be freed up each month by paying off your smaller debts first

This method, also known as the “snowball method” is a very popular way to strategically eliminate debt. However, if after your assessment you feel that this approach won’t make a big enough dent in your debt quick enough, you may want to check out the next method.

Should I Pay Off the Higher APR Debts First?

Paying off your debt with the highest APR first is referred to as the “avalanche method”. This method can be a good choice for those who have high monthly payments due to large amounts of debt tied in with high interest. While this method can take a little longer to produce results, as often you will end up tackling the highest debts first, it can also be the most rewarding once payment is completed; you’ll have more money available each month in your budget and that can be put towards paying off the next debt.

Should I Pay Off the Largest Monthly Payment Debt First?

Paying off your debt in accordance with which ones have higher monthly payments can make sense depending on how high the monthly payments are and how much debt you have. The more monthly payments you reduce, the more money you’ll have to go towards paying off the remainder of your debt.

Stay Motivated and Disciplined with Your Payments

Whichever method you choose, it’s imperative that you consistently meet your payment obligations in accordance with your plan. You’ll also need to continue to make all other credit card and loan payments on time while you are tackling paying off any one loan. If you miss payments or are late on payments while trying to pay off your debt it can set you back with fees, raised APR’s and potentially lowered credit scores.

Be Flexible and Balanced in Your Approach.

As you pay off your debt, you’ll find that your debt situation changes - be open to change. After paying off three credit cards, you may find that you have enough money to pay off another card entirely with the amount you’re saving in monthly payments and interest alone. While sticking to your plan and remaining disciplined is important, it’s definitely ok to deviate from the plan for a while if it means paying off a chunk of your debt faster. You can always revert back to the original plan at a later time.