You might be in a situation where your credit cards don't have the
highest interest rates of all your debts so rather than paying them off target the other debt before your credit cards... which brings me to the point that paying off the highest interest rate credit cards first will make your celebration that much more satisfying.
However, since the whole idea of a consolidation loan is to reduce your monthly payments, make sure that the interest rate charged for the consolidation loan is lower than the
average interest rate of the debt you will be consolidating.
Only when you can get a risk free return that is higher than
the interest rate of your debt should you consider investing instead of paying of your debt.
This means you will have to find other sources of funds and then place the cash in investment instruments that potentially offer higher returns than
the interest rate of your debts.
Prepayment risk will vary depending on the provisions of the security and current interest rates relative to
the interest rate of the debt.
It depends on
the interest rate of that debt.
Advice may also be provided on which debts to pay off first based on factors such as
the interest rate of the debt and any income tax ramifications.
But, with this strategy, you also want to include
the interest rates of your debt.
If retained profits are used to pay down debt, the investor's return will equal
the interest rate of the debt.
The small difference may also be due to the fact that
the interest rate of the debt is very close to the ROA.
They may consider what they expect to earn «more» than
the interest rate of the debt.