Etini
Valued Contributor
When we set out to start paying debts, one of the tough decisions we often encounter is always the first debt to tackle. Some people feel that paying the least expensive debt first would help them to clear the debts while others feel the more expensive debt should be cleared first. However, I am of the opinion that the debt with the highest interest should be cleared out first before having to consider the debts with the lower interest.
The first reason I took this stance is that by clearing the debts with the highest interest, you drastically reduce the cost of your debts. It is better to pay off a debt that has up to 20% interest than to focus on paying a debt with 2.5% interest. We all know what a 20% cumulative interest is like.
The second reason why you should start with the highest interest debt is that when you are able to pay off a huge debt, it motivates and encourages you on your path to living a debt free life. You would find the repayments of the other debts would come so easy to you.
Also, paying off your huge debts quickly would improve your financial health and improve your credit score.
The first reason I took this stance is that by clearing the debts with the highest interest, you drastically reduce the cost of your debts. It is better to pay off a debt that has up to 20% interest than to focus on paying a debt with 2.5% interest. We all know what a 20% cumulative interest is like.
The second reason why you should start with the highest interest debt is that when you are able to pay off a huge debt, it motivates and encourages you on your path to living a debt free life. You would find the repayments of the other debts would come so easy to you.
Also, paying off your huge debts quickly would improve your financial health and improve your credit score.
