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I saw in another thread that somebody posted about Dave Ramsey telling you to pay the smallest debt off first. Is that true? I haven't read his books or anything, but I listen to him and have read up on his methods a bit. I love this guy. Anyway, I always thought it was best to pay off the card with the highest interest? In the long run, you would save a lot on interest amounts. Just curious.
Yes, Dave Ramsey recommends paying off the smallest debt first, regardless of interest rates. The theory behind this is paying off one debt gives you momemtum to pay off another. If you are really serious about paying off the debts as quickly as possible, then the interest rates don't matter as much (although, technically, you will pay more in interest if you pay off the lower interest rate loan first).
Mommy to 2 girls , 6/26/10 & 12/31/11
Interesting. That makes sense I guess. I'm such a numbers person though that it makes more sense for me to start with the highest interest. Although, I don't know why I'm even talking about this because my smallest debt is actually the highest percentage rate so I'm doing both methods! LOL!
I thought the same thing as far as the interest rate thing. But my plan developed by a financial planner has me paying of the smallest first and then working up. And I will still save 100's of thousands of dollars in interest. My understanding is that it frees up more money faster to get the bills paid off which is why its better. I have not read dave ramsey though .