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.
For more of the detail of the study, follow this link and come to your own conclusion.
Your Money Wiz