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Paying Down Your DebtsIf you have enough income to start paying down your debts, the key is to attack one debt at a time. You should make the minimum monthly payment on all of your debts and then pay as much extra as you can on one debt every month until that one is paid off. It’s rarely wise to pay off long-term secured debts, like an auto loan or a home mortgage, before you pay off unsecured debt, like credit card accounts and medical bills. Focus first on unsecured debt. To identify where you stand and which unsecured debts to pay off in which order, grab your bills again and make another list. You’ll want to write down:
There are a couple ways to go when choosing which account to pay off first. Some experts recommend paying off the debt with the highest interest first, and that makes good financial sense. But, if that account has a high balance and you have another account with a much smaller balance, it can be good for your morale to pay off the smaller debt first.
Then, take that $300 you were paying each month and add it to the minimum monthly payment on the next debt you’re going to pay off. So if the minimum monthly payment on the next account is $175, you’ll now pay $475 each month. If you pay off one account at a time, and continue making the same payment—in total—every month, you’ll get rid of all of your debt. Assuming you aren’t making new charges at the same time. So, put away the credit cards while you’re repaying. Next: Contact Your Creditors |
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