Which loan should you pay off first? One with the lowest balance or one with the highest interest rate?

Asked by Heather

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Answered by David Strege, Senior Fee-Only Financial Planner in West Des Moines, IA
Over the long term you save more in interest by applying extra payments towards the higher interest rate loan. There is a philosophy that you pay off a loan balance and use the freed up cash flow to apply towards the next debt - where again I would recommend that the highest interest rate loan is the best choice to pay off next. | 04.25.16 @ 21:24
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$commenter.renderDisplayableName() — {comment} | 12.06.16 @ 14:25
Answered by Pouyan Broukhim, Mortgage Broker in Los Angeles, CA
You always pay your highest interest rate debt, as it is the one costing you the most. If you have low rates (3.50% of below), you always want to hold onto those as long as possible. | 04.26.16 @ 19:22
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$commenter.renderDisplayableName() — {comment} | 12.06.16 @ 14:25
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