Although commonly associated with negative meanings, debt is actually a useful tool. Debt can address immediate needs and help us survive life changing events. However, debt starts to become a problem when not taken care of.


When it comes to battling debt, there are three most referred methods, and one of them is paying off the debt in order of their interest rate. The high interest rate first method often goes head to head against the debt snowball method when it comes to debt reduction wars. While the snowball prefers paying the smallest debts first regardless of the interest rate, the highest interest rate approach, as the name suggests, prioritizes the bills that incur higher interests.

In scrutinizing the two methods, the winner will always be the highest interest rate first if you look at it at a financial point of view. By getting rid of those debts with higher interest rate first, you would have saved a good fortune unlike if you have faced them last. This is because you can avoid their interest to compound, and once you have taken out one high interest debt out of the picture, you’ll have less to worry as you go along. This is directly opposite to the debt snowball, as you start with eliminating small debt, and you get to face bigger debts as you go along.

If plain common sense and logic would be used, paying off the highest interest rate first can certainly bring in more financial benefit. However, the main problem with this method is adherence. By attacking first those debts with the highest interest rate, it takes much more work and effort. It can be exhausting, and in the middle of the task, you might just find yourself losing your focus. You get tempted and you buy unnecessary things again, making it hard to spare extra funds for your debt, and you might just give up eventually.

You also need to consider your salary before employing this method. In order to support payment for higher interest debts, you must be earning a decent income. If you do not have adequate resources, the strategy might fail in the middle of implementation, and you would have wasted time, money, and energy. You might want to consider other options to generate extra income, just to keep the method sustained.

There is actually no such thing as the perfect approach, but there can be an approach which is perfect for you and your unique character. If you are the type of person who can keep up with challenges and can exercise self control in times when you need it most, then the highest interest rate method is something you may want to consider. Do you want to take it slow and go easy on yourself, or do you want to get rid of your debts quickly and give up most of the things that you enjoy? After giving it a lot of thinking, the next thing you need is to be certain that you can stay committed in your chosen method until the end.