Two proven strategies for clearing debt — one saves the most interest, one builds the most momentum.
List every debt with its outstanding balance, interest rate, and minimum payment. Most people do not have a precise picture of their total debt until they write it all down.
Pay minimum amounts on all debts, then direct every spare dollar to the highest-interest-rate debt. Once that is cleared, roll its full payment to the next highest rate. This saves the most money over time.
Pay minimum amounts on all debts, then attack the smallest balance first. Each paid-off debt delivers a visible win and its payment rolls into the next smallest. Research suggests this keeps more people on track.
If one debt carries a significantly higher rate (credit card at 20%+), avalanche is clearly better. If rates are similar and you need motivation, snowball wins. The best method is the one you stick to.
Switch to fortnightly payments — 26 half-payments per year equals 13 full payments instead of 12. Even an extra $50 per week on a $20,000 loan at 10% can save thousands in interest.
Put these ideas to work with our free budgeting calculators — no sign-up required.
Open MrBudgetingIf debt interest exceeds expected investment returns (6-7%), pay debt first. Always keep a small emergency fund.
Paying on time and reducing balances is positive long-term, even if closing accounts has a short-term effect.
Only if the new rate is genuinely lower and you do not extend the term so much you pay more overall.
Remove saved card details, switch to debit for discretionary spending, and build a small emergency fund.