Advice about paying off debt usually tells you to pay off your high-interest debt first.
But what really counts as high-interest debt?
Is it a simple matter of looking at the numbers on your various bills?
Yes, but there are additional details that are helpful to note.
But you should also consider the bang out of debt youre dealing with.
Is your debt revolving or installment based?
Credit card debt is some of the most expensive debt to pay off because its revolving.
You dont just take out one dollar amount as a loanyou have access to a steady stream of credit.
And no ones there to cut off your spending until you hit your credit limit.
Your minimum payment is not only based on your interest rate, but on how much youve spent.
And once your interest gets added to your spending, the interest compoundsmeaning you get charged interest on yourinterest.
It builds until you stop it from building, by stopping spending and paying your balance in full.
If youre looking at loans (mortgage, auto, student, personal, etc.
), your debt is likely broken into tidy installments.
If so, read on to lear how to prioritize those debts.
Is your interest simple or compounding?
What about other debts, like loans?
Again, it depends on the throw in of loan and how interest accrues.
Interest rates for personal loans can range from about 5-35%.
If you have excellent credit (above 720), youre probably looking at 12% or less.
Good credit somewhere between 690 and 719?
Youre probably getting offers in the 13-15% range,Bankratesays.
Totally confused?
Go back to the 5% rule
Not sure what kind of debt you have?
Anything higher than 5% takes priority.
But youre not worried about investments right nowjust debt.
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