Types of Debt & Which Should be Paid off First

Debt is definitely a valuable tool. It allows one to purchase items – a house, a car, etc – that would not ordinarily be available if the full amount were needed at the time of purchase. Still, it should be used with caution. Nevertheless, some people do get in “over their heads” with debt.

kinds of debt

Worried couple sitting on their couch paying their bills at home in the living room
Source: istockphoto

Here are a few suggestions on how best to deal with this situation:

Pay the Highest Rates FirstIt should seem obvious but many people do not take this advice to heart. Pay the minimums on lower interest debt and focus all additional payments on the highest rates first.

Watch for Added Charges Also – Many credit card companies will impose a lower interest rate but then tack on “fees” for such things as service charges, administrative fees or even billing charges. Imagine, charging you to send you a bill – it is truly unconscionable.

Retire Your Student Debt – This debt can never be discharged even in a bankruptcy so you will eventually have to deal with it. Slow and steady , though, wins this race as the interest rate is usually below market.

Concentrate on One Card – This is fairly straightforward advice in that the less things you have to deal with, the less things can go wrong. Eliminate one care from your monthly to do list and you have that much more time to deal with the rest of them.

Build an Emergency Fund – Admittedly, this item should probably be first on the list but when you are drowning in a sea of debt, it may be impossible to accomplish this goal. Once you can get your head a little above water, however, this should be a priority.

Be Proactive as You Move Forward – Once you have finally regained control of your finances, it makes no sense to lose that power. Instead, manage your spending and your debt as you go along. Not only will your life be far less stressful but you will notice that you also have a lot more free cash to spend.

For further information on debt counseling and other relevant financial help for singles, couples and families, please contact us at Superior Debt Relief. We can be found online or you can be reach us directly at 866.896.7616 with any of your questions.

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