So you have decided now is the time for you to get out of debt. You look at your list of bills and wonder where to begin. Do you work to pay off the account with the highest interest rate first or the one with the lowest balance first? There are many different opinions over which method is best, but the ultimate choice will depend on your financial situation and your goals.
Pay Off Highest Interest Rate First
Paying off the account with the highest interest rate first can help you to save money over the term of the loan. As you decrease your principle balance, the amount of interest you pay decreases as well. The more money you can apply to the balance will help lower the interest accrued and get that account wiped out quicker.
If you are more concerned about saving money over time than see rather immediate results, you should probably consider this method.
Pay Off Lowest Balance First
Getting the lowest balance account paid off quickly could be the route you want to choose.
- It is very motivating and gives you a psychological boost to send that last payment and see a zero balance.
- You will now have one less account to worry about each month.
- Lower balances can be paid off quicker.
Most of us like to see instant results and the sooner we can see progress, the more we will want to continue. If this sounds like you, then starting with the small accounts would be good.
If you have account with both high interest rates and low balances, then you just hit the jackpot! Get those knocked out quickly so you can begin to tackle all of your other accounts.
Not matter which method you choose, make your plan and stick to it. Focus on one account at a time while making your minimum payments on the other accounts. Your goal is to get out of debt and you can do it!
For help in creating a plan to get rid of debt in three to five years, go to http://www.rapidlyreducedebt.com and then get more money saving tips to help eliminate debt here.