EUGENE, Ore. -- When it comes to paying down debt, it’s important to look at what your objectives and capabilities are, Oregon Pacific Bank President and CEO Ron Green said.
Which loans should I pay off first?
In other words, is it better to tackle the loan with the smallest balance first or the loan with the highest interest rate?
Green said some might say they want to reduce the amount of interest they pay over the life of the loans, so if that’s your primary driver, he recommends starting with the highest interest rate account -- credit card, loan, etc -- and reduce your principal balance on that.
However, if your issue is the availability of funds each month to go to making a payment, then look at the loans that have the smallest balance.
Green said they’re going to go away quickest, and they probably have a minimum payment requirement. When you pay off a small balance with a minimum payment, it’s going to reduce your outflow that month.
In the end, it just depends on what you hope to accomplish and what your needs are, Green said.
If you have a banking or finance question for Green, click here.