Which Debt Should You Pay Off First?

Should you start with the smallest balance or highest interest rate?

The best way to get out of debt is through focused intensity. Line up your debts and pick one. Throw everything you can at it until it’s paid off while making minimum payments on the rest. Repeat until you’re out of debt.

But here’s a question: in what order should you pay off your debts? Mathematically, you should start with the highest interest rate to minimize the amount of interest you pay. Behaviorally, you should start with the smallest balance to see some early success, build confidence, and build momentum. Emotionally, one of the debts may be more annoying than the others. Psychologically, paying off secured debts first might restore your sense of Safety faster.

Pragmatically, there may not be much of a difference. If you’re ready to get out of debt, you may be wondering which approach to take. Let’s take a look at paying off the smallest balance first and highest interest rate first (they’re the easiest to model) and put some numbers to them.

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