Understanding Your Debt
Not all debt is equal. Before making a plan, categorise your debts:
- High-interest debt (15%+ APR) — credit cards, payday loans, store cards. Priority #1 to eliminate.
- Medium-interest debt (5–15% APR) — personal loans, car finance. Tackle after high-interest debt.
- Low-interest debt (under 5% APR) — student loans (UK), mortgages. Often fine to pay minimum while investing.
The Two Main Payoff Strategies
The Avalanche Method (Mathematically Optimal)
List all debts by interest rate. Pay the minimum on all, then put every extra pound towards the highest-rate debt. Once paid off, roll that payment to the next highest. Saves the most money in interest.
The Snowball Method (Psychologically Powerful)
Pay off the smallest balance first, regardless of interest rate. The quick wins build momentum and motivation. Works best for people who have struggled to stay on track.
Step-by-Step Debt Payoff Plan
- List all debts — balance, minimum payment, and interest rate for each
- Set a budget — find extra money by cutting expenses or increasing income
- Choose a strategy — avalanche (saves money) or snowball (builds momentum)
- Automate minimum payments — never miss one or you’ll be hit with fees and damage your credit score
- Apply extra money — any surplus goes to your target debt every single month
- Celebrate and roll — when a debt is cleared, roll its payment to the next one
Balance Transfers and Consolidation
A 0% balance transfer card can pause interest accumulation for 12–24 months, giving you time to make real progress. Debt consolidation loans can simplify multiple payments into one at a lower rate. Both require good credit to access the best deals.
Calculate Your Payoff Date
Use our Debt Payoff Calculator or Credit Card Payoff Calculator to see your debt-free date and total interest.