There is some advice on the debts you should pay off, and in what order. Some debts should be paid off now and some you can take some time to do so. It is recommended that if you decide to pay only the minimum repayment that you do the payments on or before the due date so as to not have your credit affected. We hear from financial experts all the time that it is advisable to pay your debts as soon as you can and they say that there is good debt and bad debt, which is much kinder than saying that there is bad debt and worse debt! Not all debt is the same.
Consider this…If you decided to buy a house and you only wanted to use cash, buy the time you had the money to do it, you would probably be heading to a retirement home. Or if you decided that you were going to buy a car with cash, you may buy a cheap lemon or spending many, many bus trips.
If you consider that, it is easy to see why people borrow money.
Yes there is good debt which is almost unavoidable and the bad debt. That is the one that you do not want to have for too long, so paying this off as soon as you can be beneficial. To have this debt not creating too much interest it best to have it as low as you can.
Some ways to prioritize the debts you should pay off –
Mortgage – Pay This Off Later
The reasons – If your mortgage is large and you come into money, such as an inheritance or a winning of sorts, you can pay your house off. Paying it now can be a positive thing to do but if you make that your biggest goal, you may end up sacrificing things such as kids’ education or for retirement. This is a debt that you should pay off over a period of time unless financially able.
Revolving Credit Card Debt – Pay This off Now
The reasons – As the interest rates are high and rising, it is understandable to pay this off as soon as you can. It often is a lifestyle that becomes very had to stay on top of and many people find it had to stay on top of their spending, using the credit card too often and for non-essentials. There is no down side to paying credit card debts now.
Student Loans – Pay This Off Later
The reasons – Because the student loans are usually low interest rates and have extended payment periods, it is best to make your payments and not panic over them. These loans are often unsecured loans and not tied to any collateral. This means that the creditor is not likely to come and repossess your assets.
The other argument is that if you fall behind this can mean that your wages be garnished but this is still much better than losing your home or car repossessed. If you have an amount of money available, it would be better to put the cash into your credit cards rather than putting it on to a student loan.
Car Loans – Debts You Should Pay Off Sooner Rather Than Later
The reasons – If you only need to borrow a small amount and get a perfectly good used car, this is ideal. If you decide to go into debt when you buy a motor car, it is better if you can apply for a shorter loan period. In the past the average car loan was approximately 66 months. The longer the loan period, the more money you pay in interest, so this is a debt you should pay off soon.
Car Insurance Premiums – Pay Off Now (Only If You Can)
The reasons – this is a small debt that you may have and you could even say it isn’t really a debt but because it is a financial obligation that you have to pay if may as well be a debt.
If you choose to pay your insurance six months or twelve months ahead of time instead of monthly you can save on installment fees, which isn’t a lot of money but in time it adds up. This also helps as you do not have to pay the bill monthly which can help leaving you money to pay on your bigger bills. The down side is if it makes it hard to pay your other bills because you’re wanting to pay your bill for a year, then it is better to pay it monthly. To be successful in budgeting your money you need to work out the best way that works for you.
A debt you should pay off are the ones that are most pressing. The ones that are due are important as if you fail to make payments when they are due – this can affect your credit. If you have problems with your payments – it is advisable to contact the appropriate people and discuss it as it is hard to fix a bad credit report.