Hello,

I'm not sure, but this question may be slightly off topic for this board. ???

O.k. Here goes... :-)

Lately, I've been seeing the following line used over and over again.

“Why paying off your high interest debts first can be the slowest way to get out of debt.”

Since this doesn’t seem possible, due to the interest rates, I created a spreadsheet on imaginary debts. I plugged in different time slots, paying the highest interest rates first, to actually see the amount of debt being paid off.

I then recreated the spreadsheet, using the exact same debts, interest rates, and time periods. This time, however, I “paid” the lowest interest rates first.

Now, unless I’m doing something wrong, the above information… “Why paying off your high interest debts first can be the slowest way to get out of debt” is incorrect.

Also, since there are so many different variables, the above statement seems to simplistic.

For example: what if one has a credit card debt of $5,000 at 24%. And, another credit card debt of $5,000 at 12%. While the individual is paying off the lowest interest rate card first, the highest interest rate card is eating them up alive.

The only way I can see paying off the lowest interest debts first is that doing so is for psychological reasons… at least one “thinks/ feels” they are getting out of debt faster because there are less total monthly bills being paid. ???

Are there any mathematicians or accountants out there that can help clear this up? Since I’m not an accountant, maybe I really am missing something here. ???

But, the math just doesn’t seem to match up to pay the lowest interest rates first.

Any ideas or thoughts on this?

Thanks in advance.

Cordially,
Diane Everroad




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