Should I Pay A Portion Of Higher-interest Loan Or "Pay Off" Lower-interest Loan Entirely?

Hi, I have $5000 at the end of the year. I would like to use it wisely and need someone's advice. Should I use the $5000 to pay a "portion" of higher-interest loan whose balance is at $40000 or should I use the $5000 to "Pay Off" lower-interest loan whose balance is at $4820? Any benefit of paying off the entire loan? Thank you in advance.

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Willcho

asked 2 years ago

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Always pay off the smaller loans first. This way you have completely removed one source of interest/debt.

Then begin to attack the next-largest debt (even if it isn't the $40,000 debt). Once each debt is paid, continue putting the money toward the next debt. Dave Ramsey (a radio financial expert) calls this the "debt snowball" because the amount you can put to each debt gets larger since smaller ones are removed from your budget.