No. of Recommendations: 0
I read somewhere (somewher on The Motley Fool, I think) that a debt repayment strategy should be based on the lifespan of the debt. You take the minimum payment, multiply that by the interest rate, and then rank your debts according to the result. Pay the lowest one first. Like that.

My question is, should that include credit cards AND installment loans, or just cards?

I'd generally focus on the cards first as the debt in question is unsecured. If you have a car loan, then in theory you could sell the car and recoup enough money to pay off the loan. Not so with credit card debt. Granted, depreciation on a car usually won't allow this, but percentage wise you're probably closer with a car than a sweater. ;-) The other reason is that (usually) the interest rate charged on credit cards is higher than on other installment loans. By paying off the cards first (highest to lowest rates) you minimize the amount of interest you pay.
Print the post  


UGC Disclosure Notice Regarding Credit Card Posts
Community board discussions about credit cards are not provided or commissioned by banks who may have advertising relationships with The Motley Fool. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.