Your debt payoff guide

Pay each debt’s required monthly payment. When one finishes, keep that freed-up money rather than moving it to another debt. It gives your budget breathing room, but remaining debts usually take longer.

Example: you pay £50 on one debt and £150 on another. After the £50 debt clears, your total payments fall from £200 to £150. Card minimums may change each month; Ledger uses the payment you enter as a fixed estimate.

When one debt clears, put its former payment towards another debt. In the example above, you continue paying £200: the remaining debt receives its £150 plus the freed-up £50.

This is a plan you carry out with your lenders. Ledger does not move money or automatically change any direct debit. Only keep the higher total if you can afford it.

Keep up the required payments on every debt. Aim spare money at the debt with the highest current interest rate; when it clears, move on to the next highest. For ordinary debts with stable rates and no fees or restrictions, this usually saves the most interest.

A £5,000 card at 29.9% gets spare money before a £500 balance at 0%. A promotional rate ending, charges or a settlement rebate can change the best order.

Keep up required payments, then put spare money towards the smallest balance. Each cleared debt is a quick win and frees another payment. It can be easier to stick to, but may cost more interest than avalanche.

In that same example, the £500 balance gets spare money first, even at 0%.

Imagine £500 at 0% with a £25 payment, plus £5,000 at 29.9% with a £150 payment. No new borrowing, fees or rate changes. Required payments total £175 a month.

Balance is what remains to repay. Interest is the cost added for borrowing. APR is an annual comparison measure that may include fees; it is not always your contract’s interest rate.

Ledger estimates each month as: balance + new interest − payment. For ordinary capital balances, it approximates monthly interest using balance × APR ÷ 1,200. Lenders may use a different contractual rate, daily interest and fees, so this is not an exact lender quotation.

Your £12,000 example: at 11.9% using this monthly approximation, the first month adds £119. A £266.33 payment reduces capital by £147.33, leaving £11,852.67. Repeating this gives 60 payments and about £3,979.59 additional interest. Later interest falls as the balance shrinks.

For a constant monthly rate r, balance B and payment P, the textbook estimate is n = −ln(1 − rB/P) ÷ ln(1 + r). Round n up to whole payments. It applies only when P > rB; at 0%, use balance ÷ payment instead. Ledger simulates month by month to handle different balance types.