Quote:
Originally Posted by Orgazmo
I understand your concept, but I still don't see why that's better than putting all of your excess resources toward the debt that has the highest interest rate. Your money is tied up either way. Would it not be better to have it be tied up in two separate loans with an average rate lower than the rate of just the higher loan?
It seems like this may be a situation where it depends on the rates, balances, and minimum payments.
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I'm with gaz on this. In some cases if you look at the amortization of the debts it may be best to eliminate that highest interest rate one first. It's not really coincidental that unsecured store cards would both have the highest interest and the lowest limits (thereby balances). However, if the highest balance has the highest interest rate by an appreciable margin, the snowball method that DDT is repeating is not the best strategy. If in the example, debt A had a 29% interest rate and the others were under 5% then you'd adjust to pay down debt A first.
At best the snowball is a blueprint that fits for some. For what it's worth, Dave Ramsay is a fucking idiot. I used to cringe whenever I heard him go on and on about shit he really doesn't know much about. If I had $100 for everytime somebody, in an adversarial situation, told me "Dave Ramsay" says you can't do that, and then I ended up taking their money from them, I'd have thoughts of shutting down my office and walking away from it all.