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3 Ways to Calculate Which Debts to Pay Off First

which debts to pay off firstPaying off debts can be a daunting task. Whether you find yourself knee-deep in credit card debt, struggling to make ends meet every month, or desperately wish that you could pay off those student loans, there is hope. Once you’re ready to tackle them though, how do you know which debts to pay off first? 

3 Ways to Calculate Which Debts to Pay Off First

There are a few methods to determine which debts to pay off first, based on what your goals are and how immediately you need results. Understanding these methods will help you better tackle any debt.

1) In Order of Interest Rate

One method for paying off debts is to rank your debts in order of the interest rate. It makes sense to pay off the debts that are accruing the most interest first since those are the ones that can end up costing you the most in the long run. However, some people find this demoralizing. The highest-interest debt is often your largest one, too, which means that it can take months or a year to pay it off, making you feel like you’re not really making progress.

A note here about student loans — they are typically one of the lower interest debts, so making the monthly payments on them should be enough while you work to pay off your other debts. Of course, do your best not to fall behind on payments, but don’t stress over paying ahead on them.

Related: Tips to Get Lower Loan Interest Rates

2) In Order of Balance

This method was popularized by radio host Dave Ramsey, known to many for his budgeting and financial advice. He calls this technique the “debt snowball.”

Starting with the smallest debt (typically credit card balances or car payments), you put any extra funds toward paying it off while making the minimum payments on all other debts. Once the lowest balance debt is paid off, you move on to the next one! This method is motivational because you feel like you’re actually gaining traction and making progress. Instead of getting discouraged a few months into your efforts, you can see immediate results and keep yourself going.

If you’re unsure which debts to pay off first, this one is my absolute favorite. And you know what? Even Harvard agrees with me on the debt snowball. When in doubt, pay your debts smallest to largest.

Related: How the Debt Snowball Really Works (FREE Tool Included for YOUR Debt Snowball!!)

ways to save and get out of debt - debt snowball tool

3) In Order of Credit Limit

The third method for paying off your debts is to do so in order of how close you are to the credit limit for that debt. This often means paying off credit cards first and leaving any other payments until later. If you are looking to improve or maximize your credit within the next few years, paying off credit cards can be vital to that goal. The easiest way to rank your debts for this method is by percentage, looking at the ratio of your debt to the credit limit. This will require your continually reevaluating the order, as they will change from month to month.

Related: How to Get Out of Credit Card Debt

Still Not Sure Which Debts to Pay Off First? Just Get Started!!

As you can see, there are a few different ways you can tackle your debts. Picking the “right one” isn’t really all that important. What’s important is that you just get started!! If you do nothing, you’ll stay in debt forever. If you pick one of the three options above and tackle your debt with a vengeance, then you’ll probably succeed…even if you did pay $30 more in interest vs. another method.

The important thing is to get out of debt and invest for your future.

So who really cares which debts to pay off first? Just get started today! 

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AUTHOR LaTia Longuemire

My name is LaTia Longuemire. I enjoy writing, singing, and cooking in my spare time. My passion is helping others. At this stage in my lifetime, I'm primarily focused on my children. They are everything that keeps my world spinning.


  1. Hi Derek, I had the Dave Ramsey’s snowball method recommended to me by a financial counselor on the Air Force base I’m stationed at. In February of this year I was sitting at ~$21K worth of debt mixed between personal loans and a maxed-out credit card. I am 41, getting close to military retirement, and didn’t have nearly as much in savings as I wanted to. This Friday I will be paying off the final $900 on my credit card on will be completely debt-free for the first time since the age of 18. I was fortunate in that I was able to throw over $2K a month at my debt, once the counselor helped me come up with a good budget plan (I’ve always been horrible with my finances!). As you stated, the snowball method is good for keeping you motivated and feeling like you’re actually making headway. And now that I’m out of debt, that extra $2K will go towards building up that retirement savings!

    • Great job, JS! THAT’S AWESOME!! Start piling up money in your retirement account and watch it grow! It might seem slow at first, but after 10-20 years, it will really start to spike. Just wait and see!

  2. Hi Derek,
    I just started using your debt snowball calculator. However, I am having trouble with it, and it is probably just because I don’t understand how to use it. I have paid off 4 debts, and when I plugged the payoff payments into the last two, it doesn’t just add my snowball amount. It has the 2nd payment listed for the next debt with parenthesis around it and it totally whacks out my balances on that debt. Am I not doing something right, or is there a glitch?


    • Hi Amie. Thanks for sending me your snowball calculator. I saw a few errors in the way you had things set up, made a few tweaks, and sent it back your way! Best of luck paying off your debts!!

  3. Derek,

    I am having some issues I think with my sheet. Can you review it?

    • Sure, send it to my email – derek (at) lifeandmyfinances [dot] com.

  4. On its way! thank you very much

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