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URL:  http://boards.fool.com/if-you-have-a-cash-flow-problem-if-three-days-15052552.aspx

Subject:  Re: large balance vs. small balance ?'s Date:  5/26/2001  11:09 PM
Author:  warrl Number:  72765 of 308363

IF YOU HAVE A CASH FLOW PROBLEM - if three days before payday you are turning the sofa over and shaking out loose change to buy toilet paper - then any spare money you can manage goes to the debt that you can pay off most quickly. This is usually the one with the lowest balance. Along with this you'll be looking fairly energetically for ways to increase your income and reduce your operating (non-debt) expenses.

But otherwise, and absent any special issues such as debts to government agencies, court judgements, and no-contract debt to family, it is best to pay on the highest-interest-rate debt first. In terms of amount owed, this could be ANYWHERE on the list. First, last, in the middle. Doesn't matter. Go by the interest rate.

And on yet the third hand, even if it doesn't make ECONOMIC sense, it may make sense in human terms to prepay the one you can pay off first, for the sense of satisfaction of having killed one of the dragons.

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