Paying Down Your Debt

Paying down debt takes discipline, but it can be done. The feeling of freedom that comes with dispatching a debt is priceless. There are some very good strategies for paying debt, but not all debt is alike. Some debt, like mortgage debt is actually beneficial for establishing good credit and pays off in additional tax benefits. The interest is deductible on your Federal taxes, so there's little motivation to pay down the principal. However, credit card debt can have interest rates that range up to 28% in some cases. Paying this debt down is like putting that 28% as a financial reward back into your pocket. Avoid long-term, high interest loans, and instead focus on short-term loans, like payday advance loans or personal loans.

Good Debt

Good debt is debt that establishes a credit history and doesn't really require that you pay it down. Things like mortgages, student loans, and car loans are examples of good debt. If you get a fixed rate mortgage and federally subsidized loans, there's little incentive to pay this debt down first. Instead focus on other areas to pay down your debt.

Bad Debt

Credit card debt is generally considered bad debt. However, you may have more than one credit card. Start with the higher interest rate card and pay it off first. Pay more than the minimum payment Take the additional payments that you saved and apply it to your other cards. This will eliminate this debt very quickly.

Avoid long-term high interest loans. The longer you take to pay, the higher you are paying. Short-term loans like payday advance loans have to be paid back at your next paycheck cycle. In addition, payday advance loans can be free the first time you get one. This makes it a zero interest loan, if you pay it back on time.

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