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Comment by ivanche | Hacker News Reader

Others gave some very good reasons in replies. I'd just add one more - when you pay off smallest loan, you should take the money for its monthly payment and direct it towards the next smallest loan. That way you'll pay off that one much faster! Then you take that amount and direct it towards the next one etc. Trust me, debts are falling down very quickly this way!

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Yes, but you'd pay the highest interest one off even faster if you direct all your spare cash to it, then you can pay off the smaller/lower loans really, really quickly by directing the money for that monthly payment to them.

Snowballing has no money or speed benefit. The only reason to do it is the psychological "Yay! I've paid it off" boost.

Not necessarily. Counter example - if highest interest loan has outstanding balance of $100,000, car loan $5,000, credit card $1,000 and you owe to your friend $500.

Can you explain your counterexample? Perhaps with with some rates? I don't understand it.

I can't see how it is would be financially beneficial to accelerate the payment of the smaller/cheaper loans over the biggest/costliest one.

I'll concede that paying back your friend sooner than they expect might have a goodwill benefit, but not a monetary one. Even then, I'm not sure how much, over just giving it to them when they asked.

It’s not financially beneficial. The poster you replied to has no idea what he’s talking about. Repaying the highest interest loan first will still be the best choice.

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