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Do I pay extra on the smallest debt or the highest interest one?

This is a common question. When the smallest debt is at 7.8%, and a larger debt is at 21%, many would say to pay extra on the larger debt. My answer is the opposite.

Debt is often a crushing burden that affects sleep, work, social lives, families, and marriages. Accomplishing something substantial is a goal that can reap quick rewards in your peace of mind. Whether you are working on a huge debt load or a small annoying pile, the difference in overall interest paid between paying extra on the smallest debt or highest interest debt usually comes down to pennies or dimes. We’re rarely talking about significant chunks of change in overall interest paid.

The psychic encouragement and sense of accomplishment are worth the little extra that paying off that small debt will cost. I (and many other financial advisors) encourage people to pay off the smallest debt first and work their way up in balance-due order.

Thanks for reading, and please pass this on to anyone you know who could use it. And may God bless your efforts to achieve financial freedom as it leads to spiritual freedom, as well.

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