indicatorCredit and Debt

Prioritize to pay off consumer debt

By ATB Financial 7 November 2018 3 min read

Consumer debt can get a lot of people into financial trouble. Consumer debt is created by purchasing things that do not appreciate in value, where things like student loans or mortgages are considered ‘good debt’ because they are an investment. Typical examples of excess consumer debt would be large credit card debt, maxing out a line of credit or your bank account overdraft. This kind of debt usually has high interest and once racked up, can be difficult to pay off.

If you’ve found yourself plagued with a lot of consumer debt, your first thought might be to consolidate it. While that might seem like the go-to strategy for paying off multiple debts, it isn’t always the best approach for every financial situation.



“A lot of people think debt consolidation is their only option,” said Kerwin Berger, Market Advisor, ATB Financial. “Not only can consolidation loans be difficult to get, they can also take your short-term debt and stretch it out over a long period of time, costing you a lot more in the long run.”



You should always seek professional advice to find out of consolidation or another debt-paying strategy is right for your specific financial situation. In some cases, you’ll require a tactic that frees up the most cash flow, and a consolidation loan might not do that for you. Find a solution that can pay off your debt the fastest and most comfortably for your specific situation.


Prioritizing debts is a smart strategy.

Traditional wisdom in the financial world is to always pay off debt with the highest interest rate first. That approach makes sense, but sometimes, this strategy is not always the best one. In most cases, people find themselves in debt because of low cash flow. Therefore, finding a way to free up cash flow while paying debt is the better approach.


 ​“You should look at each individual debt, determine the interest rate, balance and required payment on each of them. Then use that information to determine how you can prioritize paying them off in a way that will improve cash flow as quickly as possible,” said Berger.


For example, getting rid of the debts with lower balances first is an effective way to free up some cash, making it easier to take care of paying off the larger debts afterwards. Some debts will require higher minimum payments. Getting rid of those higher required payments first can make taking care of regular living expenses easier and allow you to more comfortably and effectively make payments on the other debts.


Another smart approach would be to pay off debts that have a low balance and high required minimum payments.


“Basically, I would always recommend looking for ways to increase cash flow, before you look at interest rates on each individual debt,” said Berger. “Not only will it help you pay off debt faster, it will also make it easier to pay your regular expenses and reduce a lot of stress.


The sooner you get he​lp, the better.

The sooner you come in and talk to your bank about debt trouble, the better. 

One of the biggest mistakes people can make is not contacting their bank sooner when they find themselves in debt trouble. If you’re feeling uneasy with your debt situation, the sooner you come in and talk to your bank about it, the easier it will be to get the help and support you need.


 ​​“A lot of the time people delay asking for help because they feel embarrassed being in a bad financial situation. They should know that ATB is here to help them, not judge them,” said Berger. “Don’t wait until you can’t afford to make a payment or until you are stuck. The sooner you ask for help, the easier it will be.”


 ​If you need help creating a strategy to pay off your consumer debt, come speak to a specialist at an ATB branch near you.​​​​​

Need help?

Our Client Care team will be happy to assist.

Chat now
ATB Virtual Assistant
The ATB Virtual Assistant doesn't support landscape mode. Please tilt your device vertically to portrait mode.