Should You Pay off Smaller or Larger Debts First?
So, you’ve reached a time in your life when some of your poor financial habits have finally caught up with you. Maybe you overdid it on your credit cards; maybe you took out a loan you couldn’t pay back, and now you owe what feels like your life and soul to some nasty creditors.
First things first; don’t waste any time feeling bad. For most of us, this is an everyday occurrence; whether you’re new to debt or constantly meandering through the realms of financial uncertainty, periods of monetary strife can strike anyone, anyplace at any time. That’s why we’re here to answer those hard questions that are probably going through your head.
Initially, you may be wondering, “Should I pay off my smaller debts, or concentrate on the bigger ones first?” This is an age-old question that many individuals in your situation have thought about repeatedly. The answer can be tricky, and usually depends on some very specific factors…
One of those factors is interest. Most likely large portions of your payments are going towards interest. Interest accumulates over time when a balance is not paid off. The higher the balance, the greater your amount of interest. It’s an ugly truth that people often realize very late in the game.
Sometimes, however, interest just comes with the territory, regardless of your balance size. Some credit card companies simply charge higher rates than others, even if the amount you owe is very small. Maybe the creditor is just a little more “well-to-do” than others, but if you have a card that’s charging a high level of interest, concentrate on that one first. The higher the interest, the longer it can take to rid yourself of any debt, so removing any high-interest plastic from your wallet early on is a powerful method for securing your money down the line.
Here’s something else to consider. Sometimes, paying off smaller debts first when they’re guaranteed to disappear faster isn’t a bad idea. Paying off any kind of debt, large or small, is bound to grease the wheels with credit report companies like TransUnion or Experian, and removing a debt from your history sets the stage for your score to transcend. This will give you probable access to lower interest rates, better lines of credit, and other monetary rewards. Paying off a debt makes you appear trustworthy and responsible to creditors, and you’re likely to see circumstances improve in the future, so if you’re pressed for time, or your situation calls for a fast and open door to stronger finances, paying off a few smaller debts right away might be the way to go.
Here at New Era, we pride ourselves on offering top-notch service to millions of people looking to settle their financial burdens once and for all. If you’re tired of succumbing to stress and fiscal worry, get in touch with us today. We’re here to help you achieve the financial freedom you’ve always deserved.