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Paying off debt is a constant topic. Whether you have a home, car, property, credit cards, or student loans you have debt if you still owe payments. Unfortunately, debt can sneak up on individuals and families quite unexpectedly. Spending habits contribute significantly to how you handle your debt. Ultimately, you can’t tell someone how to spend their money because everyone has different priorities. Therefore, couples must work together to accomplish the same goal of paying off debt, individuals ought to commit to their budget changes, or there is the option of making more money to get what you want to buy.
Two Ways I Consider Paying Off Debt
First, I do understand why the common consensus says to start with the smallest loan amount first. You’re not only getting something paid off faster, but you are feeling a sense of accomplishment. Lower loan amounts mean smaller loan payments. It is easier to add additional monies to a smaller monthly payment than it is a broader note. When at all possible I encourage doubling up on payments to get the loan paid off quicker but don’t forget that any added monies help. By paying off a smaller loan you have extra money in your budget to contribute to paying offer other ones.
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Secondly, as I stated, you get the smaller loans paid off quicker by contributing more to those first. However, if you have an additional lender that charges you more interest, I would consider making more substantial payments to those lenders. You will continue to pay all other loans as scheduled, add as much as you can within your budget to the higher interest loan. Depending on the terms of your investments, a higher interest loan is usually going to have a longer duration than a lower interest loan, and you will be paying more interest over the course of the loan.
Final Thoughts
If you are the type of person that wants to see success quicker than I suggest paying off debt by starting with the smaller loans first so that you are confident in your actions. On the other hand, if you have the patience to pay off a more massive loan with higher interest, I say go for it. Remember that if you can afford to pay more to those pesky lenders, you might even want to consider paying extra on two loans instead of one. Regardless of how you decide to pay off debt and manage your monthly budget the most critical focus is setting a goal and continuing with it.
