If you are like me you probably want instant gratification. But instant gratification can be the reason why you are in debt to begin with.
When it comes to paying off debt it's OK to take a minute and think about what you are going to do. As we have discussed before you have to determine if you have a problem and start thinking about a budget. Just as those two things are important so is paying off debt in the right order.
STEP # 12 Something to think about
When you started your budget you should have been able to determine exactly what you owe each account. Write down the current balance for each debt and determine whether the loan is installment or revolving debt.
Revolving debt is any loan you have a credit limit on and can draw upon, such as your credit cards. When paying off revolving debt you increase your financial flexibility because you can always draw on the amount of the credit line you have freed up when you need it. Do you know what your interest rate is and whether they are fixed or variable? Credit cards are almost always variable since the rate can change at any time.
Installment loans usually have a fixed rate unless you have an adjustable rate loan, such as on your mortgage. Installment loans like mortgages and car loans provide you with a set schedule of fixed payments and a specific payoff date. Installment loans are generally for a set purpose and are paid off over a set time frame. You don't have a credit line to draw from.
Is the interest on any of your loans tax-deductible? Are there any prepayment penalties if you pay off the loan early? What is the minimum amount you are allowed to pay on each loan? So start making your list and checking it twice you've got something to think about.
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