My situation is that I'm receiving a one time lump sum. I have two debts to pay off.
- Debt A, interest rate 3.5%, smaller installments
- Debt B, interest rate 4.5%, bigger installments
From this, the obvious choice would be to put the lump sum toward debt B. However, debt B's interest is fully deductible from my taxes, and I expect to pay taxes for the foreseeable future. I'm in Finland, but I'm looking for a more general answer.
So, do I take that into account? Should I consider debt B to have zero, or discounted interest?