If you’ve found yourself in a situation where you are struggling to pay off multiple debts it can feel overwhelming. The best place to start is by putting a plan together for repaying your debts. Start with a budget, once you have that built and know how much you can repay think about strategy.

Here are some debt repayment options to consider.

Pay off the debt with the highest interest rate first

If you have multiple debts, it’s possible each one has a different interest rate. Mathematically, it makes the most sense to pay off your debts with the highest interest rate first. This will help you save money by minimising your interest repayments. It’s known as the avalanche method.

How to do this:

  1. Order your debts from highest interest rate to lowest interest rate
  2. Make the minimum payment on each debt by the payment due date each month
  3. Use any extra cash to pay more off the debt with the highest interest rate
  4. Once you’ve cleared the first debt, pay more off the one with the next highest interest rate
  5. Keep going until your debts are cleared

Pay off your smallest debt first

Some people feel motivated to continue when they tackle their smallest debts first. Psychologically, the small win provides a sense of achievement each time you clear a debt. It’s not the fastest way to pay off debt, but can work if you need a little motivation. It’s known as the snowball method.

How to do this

  1. Order your debts from smallest to largest in terms of money owed
  2. Make the minimum payment on each debt by the payment due date each month
  3. Use any extra cash to pay more off your smallest debt
  4. Keep going until all your debts are cleared

Pay off your debt in one go by consolidatign it

If you’re having trouble making your minimum payments across a number of debts, you might want to consider consolidating your debt  by rolling all your debts into one with a personal loan. The interest rate on a personal loan is usually lower than a credit card, although there can be extra fees and charges. Find out more about how debt consolidation loans work to make your choice.  

Where to go if you need support

If the steps above aren’t enough to make ends meet, look for assistance where possible. The Department of Human Services can help you find out what services are available for you.

If you’re a CommBank customer, you can call us on 13 3095 or request financial assistance in NetBank if you are behind, or think you are likely to fall behind, in paying what you owe. See more about our support options – including our Financial Assistance Solutions teams who are here to support you in getting back on your feet in times of financial difficulty.

Things you should know

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Some terms and conditions apply to our financial wellbeing features – please see commbank.com.au for details.