Although you can make some adjustments to the order you pay bills based on your circumstances, it's usually best to focus on paying your housing bills first, then paying what you can with the money you have remaining.
If you have credit cards with the same interest rates, you may want to pay off the smallest balance first and then work on the largest. You also may want to put the loans that save you on your taxes at the end of your debt payment plan. For example, your student loans, home equity loans, or a second mortgage.
Unsecured debts.
Stick with paying the bills that have immediate consequences for non-payment. Note: Pay higher interest rate debts first. Within this category, prioritize your credit cards with the highest rates and try to get them paid off first.
1. Repay Your High-Interest Credit Card Debts First. One of the main reasons to repay debt early is to save money on interest payments. While interest helps you spread out payments into more affordable chunks, you will pay more than if you paid in full.
Pay off high-interest student loans first. ... Pay off the student loan with the highest interest rate first. That will save you the most money over time. But if getting rid of small balances one by one motivates you more, go that route regardless of interest rate.
The answer in almost all cases is no. Paying off credit card debt as quickly as possible will save you money in interest but also help keep your credit in good shape. Read on to learn why—and what to do if you can't afford to pay off your credit card balances immediately.
It's best to pay off your highest interest rate debts first. Even if you think you have a high rate on your credit card, payday loans are still worse. The interest on a payday loan can translate to an APR of 390% and sometimes as high as 600%.
Highest priority: Housing
Housing and related bills should be at the top of your list. For most households, housing is the largest and most important expense, since you need a safe place to live. Failing to pay your rent or mortgage could result in foreclose or eviction under normal circumstances.
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Credit utilization — the portion of your credit limits that you are currently using — is a significant factor in credit scores. It is one reason your credit score could drop a little after you pay off debt, particularly if you close the account.
Let's take a look at a few ways these factors can affect your credit score. Your credit utilization — or amounts owed — will see a positive bump as you pay off debts. ... Paying off a credit card or line of credit can significantly improve your credit utilization and, in turn, significantly raise your credit score.
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