Are you ready to get out of debt and regain your financial freedom? Accomplishing this important goal requires a winning strategy that will help you knock out debts one by one. Below, Resolvly LLC provides a guide to deciding which debts you should pay off first. We’ll also take a look at key terms such as the length of the loan, interest rates, and your personal spending habits.
Read on to start your journey toward a secure financial future.
Deciding Which Debt to Pay Off First
Every consumer’s financial outlook is different. While there are proven strategies for eliminating debt, it is important to adapt these approaches to your unique financial situation. Before you can begin to do that, you need to understand that debt falls into two larger categories.
The first is known as secured debt. This type of debt is backed by collateral and includes things like your home loan and vehicle note. Secured debt is almost always paid in equal, fixed installments that have a set repayment period.
The second type of debt is referred to as unsecured debt. This consists of credit card bills, student loans, and personal loans. While some of these types of debt have fixed payments, others include revolving credit. Unsecured debt is dangerous for consumers because payments fluctuate based on your outstanding balance.
For most consumers, it is best to start by paying off unsecured debt first. This is assuming that you are not having issues making your minimum monthly mortgage and vehicle payments. In order to decide which unsecured debt to pay first, you need to examine both loan terms and interest rates.
Simply put, a loan term refers to the amount of time that you have to repay the debt in question. For instance, you may have 60 months left on your vehicle loan. As long as you remain up to date on payments, there is no rush to pay off the whole debt.
On the other hand, if you have a payday cash advance or short-term personal loan, time is of the essence. Putting off payment can ruin your credit score and result in compounding interest. This will result in even more debt.
Generally, you should tackle the debt with the highest interest rate before all others. This will almost always be credit card debt, but personal loans and weekly cash advances also have high interest rates. Get rid of the highest interest rate loan first, and you will be well on your way to a more secure financial future.
I Have Multiple Credit Cards: Where Should I Start?
As noted above, credit cards can be an especially dangerous form of debt. They offer revolving credit and likely have high interest rates. This means that it can be tempting to pay down a bit on the card and quickly max it out again when money’s tight.
If you are bogged down with debt on multiple credit cards, compare interest rates to decide where to start. If two cards have nearly identical interest rates, start with the one that has the lowest balance. Once that account is paid off, you can begin paying off the next card at a faster rate.
Are you overwhelmed with unsecured debt? If so, Resolvly LLC can help. We will connect you with a talented consumer protection attorney to guide you on your journey to financial freedom.
About Resolvly LLC
Resolvly is a Florida-Bar-approved lawyer referral service that helps clients nationwide connect with consumer protection attorneys who specialize in debt resolution. The Boca-Raton-based company was founded in 2015 and has helped thousands of Americans find the right legal-based solution to reduce or dismiss their unsecured debt. Resolvly works with a network of attorneys who will protect and enforce the rights of their clients.
Agents are there to help consumers compare the different debt relief assistance programs available. Every client is given a free consultation and overview of why legal-based debt resolution is the safest and most effective approach.
Lynn Letang is a reporter for Business News Ledger. After graduating from college, Lynn got an internship at NPR and worked as a reporter and producer. Lynn has also worked as a reporter for ESPN. Lynn covers business and community news, issues and stories for Business News Ledger.