How Should You Prioritize Multiple Debts?

A practical way to decide

1. Start by separating a normal payoff plan from a tight-month emergency. If you cannot cover every bill, first consider the consequences of missing housing, utilities, transportation, child support, taxes, or other obligations that can quickly threaten safety, income, or essential property. Contact the company you owe before a missed payment when possible.
2. When the required payments fit, list each debt with its current balance, APR, minimum payment, due date, and whether it is secured by a home or vehicle. Those five facts keep a small balance from looking harmless when its rate or consequences are not.
3. Pay every required minimum before directing extra money under an ordinary payoff plan. The CFPB debt action plan describes two common methods: highest interest rate first may reduce total interest and fees, while smallest balance first may create faster visible wins. Neither method changes the need to keep other required payments current.
4. Before making extra principal payments, protect a realistic cash floor. Sending every available dollar to debt can force new borrowing when a routine repair, deductible, or uneven paycheck arrives.
5. Confirm how the lender applies extra payments and check for prepayment terms. For some loans, an extra payment may be credited toward a future due date unless you give different instructions.
6. Recalculate whenever a balance, rate, minimum, income stream, or essential expense changes. Money Router can show a suggested order using the information you enter; review the tradeoffs and move the money yourself.

PRIMARY SOURCES

Read the underlying guidance

• Consumer Financial Protection Bureau — Debt action plan tool
• Consumer Financial Protection Bureau — Prioritizing debt payments

KEEP LEARNING

Related money decisions