There is a right answer, and it is not complicated
Rank every debt by interest rate, highest first, and put every spare pound at the top of the list while paying the minimum on everything below it. When the top one clears, move to the next. There is also a human answer — clear the smallest balance first for the visible win — and it is worth knowing exactly how much that costs.
What a UK household's list usually looks like in 2026
Arranged overdraft at a high street bank, 39.9% EAR — £399 a year per £1,000. Credit card, advertised average 36.0% APR. Sub-prime car finance, 33% average and up to 76%. A mainstream credit card, about 24.9%. The effective rate across all card balances, 21.45%. Used car finance, 13% average. A £3,000 personal loan over three years, 15.7%; £5,000 over three years, 10.5%; £10,000 over five years, 8.0%. A mortgage on the SVR, 7.13%. New car finance, 5.9%. A mortgage on a new fix, 4.66% to 5.88%.
Two things in that list surprise people
The overdraft is at the top. The debt with no monthly payment, no statement and no sense of urgency is the most expensive pound in the house. A permanent £1,000 overdraft at 39.9% costs about £33 a month. The 2020 reform that banned daily fees made overdrafts honest, not cheap.
The mortgage is near the bottom, even on the SVR. It is the biggest debt by a wide margin and the cheapest per pound. That is why the right response to a mortgage shock is often to attack something that is not the mortgage.
Four exceptions to the rate order
A 0% deal about to end. A balance transfer reverting to 24.9% in three months goes to the top regardless of costing nothing today. Deal with the cliff before it arrives.
Anything secured on your home. A second charge or secured loan is lower rate than a card and carries a risk a card does not.
A debt about to become a problem. Council tax arrears escalate quickly and enforcement moves faster than on most consumer credit. A free adviser calls these priority debts and deals with them first whatever the rate says.
Your student loan. Leave it out of this list. Repayment is a percentage of income above a threshold, not a fixed amount; interest does not change what you pay each month; it is written off on a fixed date whatever the balance; and it does not appear on your credit file. For a household facing a payment shock it is almost always the wrong debt to overpay.
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