When you have limited extra money and multiple debts, the sequence matters. The right priority order balances financial math with practical urgency.
First, never miss a minimum payment on any debt. Late payments damage your credit score, trigger penalty APRs, and can escalate some loans. Before optimizing, make sure every account is current.
Second, attack your highest-interest debt next. Credit cards, personal loans at high rates, and payday loans tend to carry rates that grow faster than almost anything else in your budget — every extra dollar applied here saves the most interest. Two common approaches: the avalanche method (highest rate first, mathematically optimal) and the snowball method (smallest balance first, easier to stay motivated).
Third, once high-interest debt is cleared, lower-rate debt like a mortgage or federal student loan becomes a personal call. Some people prefer the certainty of being debt-free; others are comfortable paying it down on schedule. Either is defensible — pick the approach you’ll actually stick with.