I have heard several people talk about different ways to approach paying off their debt.  It seems to come down to 3 different ways:

1.  Pay off the loan with the highest interest rate first
2.  Pay off the loan with the highest monthly payment
3.  Pay off the smallest loan first
(am I forgetting one?)

What do you prefer?

I personally have been taking the approach of paying off the smallest loans first.  Once that is paid off I am using the extra money that I freed up from my monthly bills and applying it to the next loan in line - kind of like a snowball effect.  By the time I am at my last loan, I should be able to make payments of several thousand dollars each month.

Now the only thing that I would consider other than this is paying off the loan with the highest interest rate first (since it is costing you the most money in the long run).

But is there really a fastest way to pay off your debt?

I think it is wise to pay off higher intrest rate debt if you can.  Although for most people this may take the longest.  I think most people will find it easier to pay off small debt first.  It will produce a faster 'reward,' - something is paid off.  Then you can take that payment and add it to another debt. 

My wife and I looked over our situation, and even with the debt we have, the one highest interest rate is not that bad.  So we paid off a few smaller debts first.  That is the approach we are taking for now.

Sure, but is it always faster to pay off the higher interest loan?

Say, for example, that you have a $2,000 loan that you are paying $150/month on with a low interest rate, and then you have a $40,000 loan with a high interest rate that you are paying $300/month on (like a second mortgage).  You have an extra $300/month that you can spend on debt...

If you take care of that $2,000 loan, suddenly you'll have an extra $450/month to pay off debt.

I think it would depend entirely on what your loan situation is...

No it is not faster to pay off the higher interest rate debt.  I wasn't including mortgages or 2nd mortgages in my statement. 

I think it does totally depend on each individuals situation.

Agreed.

Just so you know, more people will be coming - I haven't done any promotion here yet.  However, if you know anyone who would be interested in this, feel free to let them know.

These are good points.

I think you are right about each situation being different.

I think more will show up. There is good info here.

Yes , every situation is different  and one should take each debt as it comes . I don't jump into paying every debt together . I make a plan of paying smaller once first and then store funds to pay bigger one.

Personally I think that if you have credit card debt, pay off this as much as you can.
When finished cut the card in two and cancel, it is just too tempting to use. Try then to identify luxuries you enjoy but don't really need and minimise those costs. Research and identify any areas of cost that may be replaced with more cost effective means, eg telecommunications is one area with many lower cost options, and riding a bike to work rather than drive is another that would cut down on fuel costs. On the positive side research and identify any extra income sources possible, ie the service industry is a good start, as many people are short on time, some common household tasks are increasingly outsourced. Hope this helps.

Cheers
Marty