Which Debt should you pay off First?
If you have a lot of debt, deciding where to put your money can be a difficult decision. This is especially true if you have debt which is spread out across many loans. That being said, you should come up with a plan for paying off your debt in the best possible manner. Believe it or not, there is a method that you can use to better your situation and in turn pay down your debt as quickly as possible.
First things first, you need to realize that some debt is better than others. For instance, although your mortgage and car loan is debt, you should not look at this in the same way as credit cards, department store cards, etc. In most cases, you will want to pay down your “bad debt” first.
What if I have several credit cards that need to be paid off? As a general rule of thumb, begin by paying extra on the one with the highest interest rate. Obviously, you will save yourself a lot of money in the long run by paying off a credit card with a 25 percent interest before one with a rate of 10 percent. This is nothing more than a numbers game in which you need to have precise knowledge of your debt, the corresponding interest rate, and how you are going to pay it back.
The bottom line is that you should pay off bad debt first. To take this a step further, start with the debt that has the highest interest rate. If you follow this path, you will be on your way to paying down your debt in the quickest and most effective way.
