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Pay Debt With High Interest First


There are two major exceptions. The first is debt with 0% interest, such as subsidized student loans, or promotional debt from buying a car. You can do minimum payments on this until the 0% interest runs out, since you can invest that money and earn 3%. The other major exception is any loan that is low enough that you can make more investing the money than not. This may be true for mortgage and business loans, as these rates are usually a product of stock market fluctuations and you have collateral– such as a house, to pay the loan if things go south. For example, if you pay a fixed 2.8% in mortgage but can earn 4 or 5% on an investment, you have no reason to rush your mortgage payments!


  1. Two types of loans are OK to leave aside. 0% interest loans are always fine to leave as-is until repayment. Low-interest loans, like mortgages, can be drawn out