One of the hottest debates in the personal finance field is whether folks with several installment loans should pay off the smallest debts first or those with the highest interest rates. A recent study addresses that issue and concludes that because of psychological reasons, rather than financial reasons, the smallest debts should be paid off first.
According to the report, researchers who study consumer behavior found that “small victories” consumers feel after quickly wiping out small debts provide encouragement to pay others. That’s counter to the usual advice to pay debts from highest interest rate to lowest, with the goal of paying less interest.
Davis Financial Services brings to life the long-time dream of its founder, Patricia A. Davis. The dream: Improve the lives and finances of everyday people by expanding their knowledge and understanding of important financial matters. Davis Financial Services offers public and private sector organizations and individuals a full curriculum of innovative, well-researched education programs designed to explain, clarify, and demystify financial subjects. Since inception, DFS has helped thousands of individuals to secure a better financial future.