Which Debt Should You Kill First? Let’s Make It Obvious

Before You Prioritize, You Need This One Non‑Negotiable

Let’s get one thing out of the way: in a debt repayment budget, some payments are not up for debate. They live at the very top of the priority list every single month.

I’m talking about:

• Rent or mortgage (you need a place to live)
• Utilities (lights, heat, water)
• Basic food and transportation
• Minimum payments on all debts

Skipping a minimum payment to “go hard” on another debt sounds bold… until late fees, penalty interest rates, and credit score damage show up. So in your template, those minimums should be locked in first.

Once that base is covered, then the real prioritizing begins: where do the extra dollars go?

Debt snowball or avalanche – does it actually matter?

You’ve probably heard these two methods tossed around:

• Snowball: you pay extra on the smallest balance first.
• Avalanche: you pay extra on the highest interest rate first.

Both work. Both can fit neatly into a debt repayment budget template. The question is: which one keeps you going?

If you love quick wins and visible progress, snowball often feels better. If you’re laser‑focused on saving the most money on interest, avalanche usually wins.

Let’s walk through how this looks when you plug real debts into a budget.

How a credit card spiral gets untangled

Take Maya. She’s 32, living in a small apartment, and has three credit cards plus a car loan. On paper, it looks like a mess. Inside a repayment budget, it becomes a plan.

Her debts:

• Credit Card A: \(600 balance at 24% APR, minimum \)30
• Credit Card B: \(2,800 balance at 21% APR, minimum \)70
• Credit Card C: \(5,200 balance at 17% APR, minimum \)120
• Car loan: \(9,000 balance at 6% APR, payment \)260

Her monthly take‑home pay is \(3,200. After rent, utilities, groceries, gas, and a very modest fun category, she has \)550 left for debt payments.

The non‑negotiable minimums:

• Card A: $30
• Card B: $70
• Card C: $120
• Car: $260

That already uses \(480 of the \)550. She’s got $70 extra to aim somewhere.

How her budget looks with the avalanche method

Maya decides interest is eating her alive, so she goes avalanche.

In her spreadsheet or template, she:

• Lists all debts with interest rates
• Highlights the highest rate (Card A at 24%)
• Sets every other debt to “minimum only”

Then she tells her budget: “Extra debt payment: always to Card A until gone.”

So each month:

• Card A gets \(30 minimum + \)70 extra = $100
• Cards B and C, and the car, get only their minimums

In her repayment budget template, that shows up as a simple rule:

Extra payment: Card A

Once Card A is paid off, she doesn’t celebrate by spending that $100. She changes the rule in her template:

Extra payment: Card B (next highest interest)

Now Card B gets:

• \(70 minimum + \)100 from the old Card A payment = $170

She keeps repeating that pattern. Same total out of her budget, different target. That’s the heart of prioritizing: the order changes, not the total effort.

What changes if she goes snowball instead?

If Maya is the kind of person who needs a quick win to stay motivated, she might not care that Card A and B are both high interest. She might just want a balance to disappear.

In that case, she sets her template to sort by balance size, not interest.

• First target: Card A ($600)
• Second target: Card B ($2,800)
• Third target: Card C ($5,200)

Funny thing? For her, the first target is the same either way. But if she had a tiny store card at 12% with a $200 balance, snowball would tell her to kill that first, even though the interest rate is lower.

Inside a repayment budget, that looks like:

• Column for “Priority Order” based on balance
• Rule: “Extra payment always goes to lowest remaining balance”

The math shifts slightly, but the structure of the budget doesn’t. You’re just changing which row gets the extra money.

When a car loan and student loans complicate things

Now let’s look at a family where the trade‑offs get trickier.

Evan and Jordan have:

• Car loan: \(15,000 at 8% APR, payment \)350
• Private student loan: \(22,000 at 10% APR, payment \)250
• Federal student loan: \(18,000 at 5% APR, payment \)180
• One small credit card: \(900 at 23% APR, minimum \)35

They bring home about \(5,000 a month. After housing, food, kids’ expenses, and basics, they have \)900 left for debt.

Their minimums total:

• Car: $350
• Private loan: $250
• Federal loan: $180
• Credit card: $35
  Total: $815

That leaves them just $85 extra.

How they decide what really comes first

On paper, the highest interest is the 23% credit card. Emotionally, they’re nervous about the car—losing it would wreck their ability to work.

So in their debt repayment budget template, they split their thinking into two layers:

1. Safety layer: payments that protect their stability

   • Car loan stays fully current, no late payments
   • Federal student loan kept out of default (they even check if an income‑driven repayment plan would lower that payment at studentaid.gov)

2. Attack layer: where the extra $85 goes

   • They give that entirely to the credit card until it’s gone

Their budget rule becomes:

Pay all minimums. Any extra: credit card first, then private student loan.

Once the \(900 card is paid off, they don’t let that \)35 minimum payment evaporate. They update the template so that:

• Old card minimum (\(35) + extra (\)85) = $120 now goes to the private student loan.

This is how prioritizing looks in a real budget: you’re constantly reassigning “freed‑up” money from paid‑off debts to the next one in line.

How do you handle medical bills without sinking everything else?

Medical debt has a way of showing up at the worst possible time. It also behaves differently than a credit card or car loan.

Take Lena. She has:

• Medical bill: $4,500, no interest yet, hospital offers a payment plan
• Credit card: \(3,200 at 19% APR, minimum \)80
• Personal loan: \(6,000 at 11% APR, payment \)190

Her budget allows for $600 a month toward debt.

If she panics and throws everything at the medical bill, she risks letting the credit card balance grow with high interest. If she ignores the medical bill, it might go to collections.

So in her repayment budget, she does something that feels almost too simple:

• Calls the hospital and negotiates a low, fixed monthly payment (say $75) and gets it in writing
• Locks that $75 into her template as a non‑negotiable minimum, just like any other bill

Now her minimums look like this:

• Medical: $75
• Credit card: $80
• Personal loan: $190
  Total: $345

She still has $255 left to aim somewhere.

Because the medical bill isn’t charging interest (for now), she gives the extra $255 to the credit card, the most expensive debt.

Her budget rule:

Minimums to all. Extra: credit card until gone, then personal loan, medical last.

If the hospital ever threatens to add interest or collections, she can revisit the priority. But in her template, the logic is clear and written down, not just swirling in her head.

For more on dealing with medical bills, the Consumer Financial Protection Bureau has solid guidance here: https://www.consumerfinance.gov/consumer-tools/debt-collection/medical-bills

Where does mortgage or rent fit in this picture?

If you own a home, your mortgage is almost always in the “must pay, but usually not extra” category—at least while you’re getting rid of higher‑interest debt.

Why? Because mortgage rates are often much lower than credit cards or personal loans. So in a debt repayment budget, the mortgage usually lives here:

• Housing section: full payment, treated like rent
• Debt section: focus on higher‑interest stuff first

Someone like Carlos, who has:

• Mortgage at 4.5%
• Credit card at 22%
• Auto loan at 9%

…will usually:

• Pay the mortgage as scheduled
• Make minimums on all debts
• Throw any extra at the credit card first, then the auto loan

The mortgage prepayment comes later, once the expensive debt is gone and the budget feels lighter.

How to reflect your priorities inside a template (without overthinking it)

If you’re using a family budget or debt repayment template, you don’t need anything fancy. But you do need clarity.

A simple setup might include:

• A column for Debt Name
• A column for Balance
• A column for Interest Rate
• A column for Minimum Payment
• A column for Priority Order (1, 2, 3… based on your chosen method)
• A cell that says “Extra Debt Payment Target” with the name of the current focus debt

Each month, you:

• Enter your income
• Cover living expenses
• Lock in all minimums
• Put whatever is left in a single line: “Extra debt payment”
• Point that extra to the debt with Priority 1

When that debt is paid off, you don’t lower your total debt budget. You simply:

• Change the Priority 1 status to “Paid”
• Move Priority 2 up to Priority 1
• Update the “Extra Debt Payment Target” cell

It’s basically a relay race inside your budget. One debt hands the baton (your payment) to the next.

If you want a structured starting point, the Federal Trade Commission has helpful tools and advice on getting out of debt: https://consumer.ftc.gov/articles/getting-out-debt

What about debts that can literally take your stuff?

Some debts have more immediate consequences than others. That doesn’t mean you ignore the rest, but it does tweak the order.

Debts tied to collateral (things they can take away) often get bumped up in priority:

• Car loans (they can repossess the car)
• Mortgages (foreclosure risk)
• Certain secured personal loans

So if you’re choosing between paying extra on a credit card or staying current on a car loan that gets you to work, the car wins for basic stability. But once you’re current and safe, the extra above the required payment can still go to the high‑interest debt.

In your template, that might look like:

• Car loan: marked as “must stay current,” but gets only its regular payment
• Credit card: labeled as “extra payment target”

That way, you’re protecting your ability to earn income while still attacking the most expensive debt first.

When priorities change mid‑stream

Life does not care about your carefully color‑coded spreadsheet. Jobs change, babies arrive, medical stuff happens, interest rates jump.

The good news? A debt repayment budget is meant to be edited.

Some common moments when people reshuffle priorities:

• A teaser credit card rate expires and jumps from 0% to 25%
• A car loan is almost paid off, freeing up a big chunk of cash
• A new 0% balance transfer card appears, and you move a high‑interest balance
• Income drops and you need to switch some loans to income‑based or hardship plans

When that happens, you don’t throw the whole system away. You:

• Update balances and interest rates in your template
• Re‑sort by your chosen method (snowball or avalanche)
• Rewrite your “extra payment target” rule

That’s it. Same muscles, slightly different workout.

For student loans in particular, it’s worth checking current options and repayment plans at https://studentaid.gov.

FAQ: Prioritizing debts in a repayment budget

Should I ever pay extra on multiple debts at the same time?

You can, but it usually slows down your visible progress. Most people do better by choosing one primary target for extra payments while keeping minimums on everything else. The psychological boost of watching one balance fall quickly is, frankly, worth a lot.

Is it okay to prioritize a smaller, low‑interest debt just for peace of mind?

Yes. Money is math, but it’s also emotional. If clearing a small, annoying debt gives you momentum, that’s not a bad choice. Just be honest with yourself: you’re trading a bit of interest savings for motivation. If that motivation keeps you going, it can be totally worth it.

Where do buy now, pay later (BNPL) plans fit in my priorities?

Treat them like short‑term, high‑risk debts. They often have fees or retroactive interest if you miss a payment. In your budget, list each plan, note the end date, and make sure those installments fit comfortably. If you’re tight, they should rank high in priority so you don’t trigger penalties.

Should I build an emergency fund before paying extra on debt?

A small emergency fund—think \(500 to \)1,000—can actually protect your debt plan. Without it, every flat tire or broken appliance ends up back on a credit card. Many people pause aggressive debt payoff just long enough to build that starter cushion, then redirect extra money back to debts.

How do I know if I need outside help with my debts?

If your budget can’t cover all minimums, or you’re using new debt to pay old debt, it’s time to talk to someone. A reputable nonprofit credit counseling agency can help you review options and may suggest a debt management plan. You can start with organizations referenced by the National Foundation for Credit Counseling: https://www.nfcc.org.

The bottom line? A debt repayment budget isn’t just numbers—it’s a ranking system. You’re deciding, on purpose, who gets paid first, who waits, and where every extra dollar goes. Once you write that order into your template, the chaos quiets down. Your money finally has a job description, and your debts stop running the show.