Skip to main content
Finding Financial Balance

Debt repaying strategies: How do you decide?


Do you have multiple debts that need to be paid down? When it comes to paying off debt, do you have a strategy? Debt can be overwhelming and can easily get hard to manage. If you have loans you need to pay down, take some time to organize your debt and make a proactive plan on how to pay down your debts. Some people choose to pay the bills as they come or as they were set up when the money was borrowed. Maybe you like to pay debt roulette and pay whichever bill comes on your radar in the moment. You may want to follow an intentional strategy such as the avalanche strategy (highest interest rate first), or the snowball strategy (lowest balance first). Learn about the different repayment options and decide what makes the most sense for you.

Pay debt as scheduled

When taking out a loan, the terms typically dictate how the repayment is scheduled. For example, if you take out a 5-year or 60-month car loan, the monthly payments are calculated based on this amount of time with the agreed costs and interest incurred. While following the scheduled payments has the benefit of consistency, the duration or length of time to pay off the debts may be longer than you want to maintain. Paying more toward the debt beyond the minimum payment can reduce the amount you pay overall by incurring less money in interest. If you are able to pay more toward a debt in addition to the standard payment, how do you decide where to pay first?

Shortest term first

Paying off the debt with the shortest repayment time first after making all the minimum payments is an option. This option focuses on getting the debts paid that are due to end first. The opportunity cost of this strategy is that you may be paying off debts with a lower annual percentage rate (APR) first, which could cost you more in interest overall. The positive is that you at least are focused on getting the debts paid off in time.  

Snowball or lowest balance strategy

A fast way to reduce the number of debts held is to pay off the lowest balances first after making all the minimum payments or the snowball strategy. This strategy can help with the motivation to continue focusing on becoming debt-free or feeling less weighted down by debts. If you are juggling many debts and are struggling to make timely payments, reducing the number of debts held may benefit your ability to stay organized and focused on a debt payment strategy. The disadvantage of the snowball strategy is that the average household pays an additional 1.8 – 4.3% in interest charges from this method.

Avalanche or highest interest strategy

The avalanche or highest interest strategy focuses on paying down the debt with the highest interest rate first after making all the minimum payments. The highest interest rate, or APR, determines how much you pay back in total for the service of borrowing money. When deciding to borrow money, it is important to compare the APR to decide which loan will cost the least in repayment. This strategy can be the most cost-effective way to reduce debt by paying all minimum balances and then allocating any extra funds toward the highest-interest loan first. The disadvantage to this strategy can be the potential motivational concerns as the progress may not be as easy to see in the short-term.   

While different strategies may result in varying degrees of financial or mental benefits, the common theme is to have a strategy in mind when repaying debt. Set a financial goal to focus on organizing and prioritizing your debts in a way that works for you to lower how much you owe. Once you are able to reduce your debts, you can spend more time focusing on building your wealth.


Hamilton, B. (2023). Two Steps Forward, One Step Back? Quantifying the Pecuniary Costs of Debt Account Aversion and the Debt SnowballSouthern Economic Journal89(3), 830–859.

Mahlandt, J. (2023). Do you find debt distressing? University of Illinois Extension: Finding Financial Balance blog.

Mahlandt, J. (2024). Deciding on debt: To borrow or not to borrow?. University of Illinois Extension: Finding Financial Balance blog.


Meet the Author


Jamie Mahlandt is a Financial Educator for Bond, Clinton, Jefferson, Marion, and Washington counties in Southern Illinois. She provides financial education to the local community with an emphasis on financial literacy and financial well-being.



Subscribe to blog updates HERE.