As previously mentioned, there are a couple of types of debt that should be prioritised over and above all else, but if consumer debt is your only liability, there are a couple of methods for prioritising your debt that work really well.

The method that you choose should depend on what motivates you and what kind of process you respond well to – do think carefully about what’s right for you before making your plan.

The ‘avalanche’ or interest-first method involves listing your debts in order from highest APR to lowest, and prioritising clearing them in this order. You make minimum repayments on all debts, but put the rest of your disposable income towards paying off the debt with the highest APR. Once this debt is paid in full, you reallocate that monthly payment to the debt with the next highest APR, and so on until you’ve cleared your debts entirely. This method means that you will pay the least amount of interest overall, and will clear your debts marginally quicker than any other way.

The ‘snowball’ or balance-first method works in the same way, but your debts are listed from smallest balance to largest. The same process applies: making minimum payments on everything, but prioritising the account with the smallest balance for any extra spare cash, then following the same steps until you clear everything. This can be great for those who struggle with motivation, or those looking to streamline and uncomplicate their financial burdens, because you are able to clear those first accounts relatively quickly and get them closed.

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