Debt reduction takes a lot of discipline.  People usually don’t get into lots of consumer debt overnight, and people can’t get out of debt overnight either.  Doing so takes regular payments beyond the minimum payments, because making just the minimum payments is a surefire way to make your servitude to that debt last as long as possible.

But, given the option of throwing extra money at one of your debts, which one should you choose to tackle first?  Fortunately, it ultimately doesn’t matter a whole lot, but one good choice is pay off the debt with the lowest balance first. Given a $5,500 car loan, a $10,000 student loan, and a $1,500 credit card balance, a decent choice would be the $1,500 credit card balance, regardless of which debt had the highest interest rate.

Why pay off the lowest balance first, even if there are other higher-interest-rate debts?

Hitting the highest interest rate first would save more money in interest, but that’s not the primary motivation for paying off the smallest debt first.  The main reason to knock out the little debt is purely a matter of psychology.  Killing a debt is a great accomplishment. Killing a small debt is still killing a debt, right?  That’s it.  And once that little debt is out of the way, what was being paid on that debt can be applied to the next debt.  Because this debt was the smallest one, this turbo boost happens sooner rather than later.

Regardless of which debt you decide to pay down first, the point is to choose one, and hit it hard!

• Flashback: Work your debt reduction plan Waaaaaay back in Carnival of Debt Reduction #1, No Credit Needed was still in debt. His post for the premiere installment outlined his debt reduction strategies. His strategies were pretty simple: Collect your debt information and list the balances, annual percentage rates (APRs), and minimum payments. Go through your budget......
• Flashback: Any snowballing will get you out of debt faster Frugal for Life hosted Carnival of Debt Reduction #6.  (~Dawn has been a big supporter of the carnival, and it's much appreciated!) I haven't submitted too often to this carnival because I'm not actively involved in consumer debt reduction.  I did manage to get a post together on the snowball......

• Getting Out of Debt 103 Debt Elimination Step #3 - Finally, you have to implement what is known as a debt snowball. The third and final step of this process, implementing a debt snowball, is a step that could easily require several years depending on how much debt you are dealing with. Once you have......
• Is Debt Consolidation the Right Option? If you happen to be struggling with paying your bills, then debt consolidation might be a good solution for you. Debt consolidation is where you combine all of your bills and debt into one, so that you are making one single lowered payment that can be afforded. Consolidating helps you......