Nowadays, an average person carries one or two debts, such as credit cards, mortgages, car loans and personal loans. With all the debts to pay, you might wonder which debt to pay first?
Indeed, it is important to meet the minimum payment for each debt you owe. However, you need to prioritise in order to quickly get out of debt. There are strategies you can use. Here are some options that will help you decide on which debt to first pay off.
Debt with Highest Interest Rate
Paying off the debt with the highest interest rate first is a good decision because it is the debt that burdens you the most. Once you pay it off, a huge portion of your finances will be freed. You can redirect the money to other financial goals or debt you have.
The Smallest Debt
Paying off the smallest debt first is a popular method that builds motivation in paying off your debt completely. By paying off your smallest debts first, it encourages you to stick with your goal. As you pay off each small debt, you free up more money you can use to pay off your larger debts. Unfortunately, this option may take longer and you may end up paying more interest.
Debt that Affects Your Credit Score the Most
Credit score impacts your life. A good credit score can help when making large and important purchases like a home or car. However, if your credit score is bad because of your debt, then those opportunities will be out of reach. Paying off your debts that affect your credit score the most will help open up those opportunities.
Indeed, it is important to meet the minimum payment for each debt you owe. However, you need to prioritise in order to quickly get out of debt. There are strategies you can use. Here are some options that will help you decide on which debt to first pay off.
Debt with Highest Interest Rate
Paying off the debt with the highest interest rate first is a good decision because it is the debt that burdens you the most. Once you pay it off, a huge portion of your finances will be freed. You can redirect the money to other financial goals or debt you have.
The Smallest Debt
Paying off the smallest debt first is a popular method that builds motivation in paying off your debt completely. By paying off your smallest debts first, it encourages you to stick with your goal. As you pay off each small debt, you free up more money you can use to pay off your larger debts. Unfortunately, this option may take longer and you may end up paying more interest.
Debt that Affects Your Credit Score the Most
Credit score impacts your life. A good credit score can help when making large and important purchases like a home or car. However, if your credit score is bad because of your debt, then those opportunities will be out of reach. Paying off your debts that affect your credit score the most will help open up those opportunities.