Debt
Not all debt is the same, and treating it as one thing is what keeps people stuck. These pages sort out which debts need urgency and which need patience.
Which debt should I pay off first?
Pay the minimum on everything, then send every spare unit to the debt with the highest interest rate. That is mathematically the cheapest route. It usually beats paying the smallest balance first by a surprisingly modest amount — often less than one month's payment — so if finishing something quickly keeps you going, that trade is worth making.
What actually happens if I only pay the minimum on my credit card?
The balance barely moves and the debt outlives most things you own. On a 3,000 balance at 22 percent, paying only a two percent minimum takes roughly 47 years and costs about 18,000 in interest. Paying a fixed 150 a month clears exactly the same debt in about two years.
Is all debt bad?
No. Debt is a tool with a price, and the price is the interest rate. Borrowing at four percent for something that lasts thirty years is a different act from borrowing at twenty-four percent for something consumed last weekend. Judge the rate and what the money bought, not the word itself.
How do I know if a debt is expensive?
Compare the rate against what you could realistically earn by investing over many years, and be pessimistic about the investment. Anything above that line costs you more than it could ever make you. In practice that puts credit cards, overdrafts, store cards and short-term consumer credit clearly on the expensive side.
Should I use my savings to pay off debt?
For expensive debt, mostly yes — savings paying three percent while a card charges twenty-two is a guaranteed loss of the difference. But clearing the debt to zero and leaving nothing behind is how the debt comes back. Keep one month of essential spending, and use everything above it.
Should I invest while I still have debt?
Take any employer retirement contribution first — that is a guaranteed return nothing else matches. After that, clear high-interest debt before investing, because repaying a twenty-two percent debt is a risk-free twenty-two percent return. Low-rate long-term debt like a mortgage is a genuine judgement call rather than an obvious one.
Should I consolidate my debts?
Only if the new rate is genuinely lower once fees are counted, and only if what created the debt has changed. Consolidation moves debt; it does not reduce it. The common failure is clearing the cards, feeling relieved, using them again, and arriving a year later with both the loan and the cards.
Should I pay off my mortgage early?
It is a legitimate choice but a preference for certainty, not an obvious win. Overpaying earns you exactly your mortgage rate, guaranteed. Investing might earn more, and might not. Clear expensive debt first and keep a buffer; after that, either answer is defensible and the difference is smaller than the argument suggests.
How do I get out of debt when I can barely make the payments?
Stop optimising and start triaging. Protect housing, food, utilities and transport to work first — those come before any creditor. Then contact lenders before you miss a payment, because almost all of them have hardship arrangements they will not offer unless asked. Free debt advice exists in most countries and is worth using early.
How long will it take to pay off my debt?
Divide the balance by what you can pay each month for the floor, then expect interest to add twenty to fifty percent on top at credit-card rates — the smaller the payment, the bigger that penalty. A 3,000 balance at 150 a month takes about twenty-six months. At 250 a month, fourteen.
Should I close a credit card after paying it off?
Not necessarily. Closing it removes temptation, which is worth something real. It also reduces your available credit, which in countries with credit scoring can make future borrowing slightly harder. A reasonable middle: keep the account open, but take the card out of your wallet and delete it from saved payment details.