Should You Pay Off High Balance or Low Balance Debt First?

Tips For Paying Off High Balances or Low Balances First

First Published Date : May 13, 2012 ADawnJournal.com

Paying off debts involve making plans and sticking to them vigorously to get rid of all debts. One simple question always comes to mind while making debt payment plans, whether to start paying off low balances or high balances, low interest or high interest debts first. Today, I will discuss which strategies to pick and what to consider in terms of getting rid of your debts.

Let me tell you right up front that there is no best right answer. Paying off high balances and paying off low balances – both strategies have positive and negative sides. I personally like starting with low balances without looking at interest rates.

Pros and Cons of Paying Off Low Balances Without Looking At Interest Rates

– If you start with paying off lower balances, seeing those smaller debts evaporate will keep you motivated to stay on your debt management plan.

– Easier to manage your finances, as you are reducing smaller debts one-by-one.

– This strategy can cost you more money in the end, as you may be carrying higher balances with higher interest longer.

– Makes your life stress free, as you are dealing with less debt accounts day-by-day.

Pros and Cons of Paying Off High-Interest Debts Without Looking At Balances

– Best strategy to save money on interest charges

– You may get discouraged to stay on debt management plan seeing debts not going away soon enough.

– If you have higher balances with lower interest charge, this strategy does not make managing your finances simpler, as you are dragging the low interest debts longer.

Last Word

Which strategy is best to follow? It depends on your situations and objectives. Before deciding on anything, look at the pluses and minuses for both of the strategies and pick the one that makes sense for you. And yes, don’t forget to stop taking on new debts. No debt management plans will work if you don’t stop accumulating new debts first.