<prompt> Human: So hopefully the title makes sense, and sorry if this is a repost but I did search for something similar and I couldnt find anything. So if I have a a 5k principal and a 5 IR, and another loan with a 1k principal and 5 IR, and I had 1k to spend. Where would it be better invested?I assume the higher principal  <response>: Mathematically it is equivalent. You will save 5 x 1000 dollars. However, by getting rid of the lower balance first, that frees up the money you were having to pay on the minimums on that account to go straight towards the other loan. So if currently those loans have a 100 an a 20 payment. Paying off the 1000 loan saves you the 5 on that money, plus you can immediately put that 20 towards the bigger loan, saving you even more money. Plus there is the freedom of having 1 less debt, but that is psychological not financial. EDIT - My statement about them being the same is based on the idea of them being the same term. If you have a longer loan, reducing its principal by the same amount, will save you more money than paying off the lower loan with a shorter term 