Once you decide to take charge and get on a high powered debt reduction plan, you might wonder: is it better to pay the smallest debts off first or the highest interest ones first?
Well, both ways have their advantage, so depending upon what’s most important to you, you’ll have to decide.
Smallest debts first – the benefit of paying smallest debts off first is that you actually get to see progress quicker. When you can see the list of people that you owe start to shrink, it makes you feel good and you know that you’re plan is working.
Highest interest first – the benefit of paying the highest interest debts off first is that you save more money over the long term than if you were to let the higher interest rate linger on.
A good rule of thumb to use: If you have more than 4 debt accounts, use the smallest debt first method; otherwise pay the highest interest rate debts off first.