Paying Off Debt Is A Journey, Where Should It Start?




Clearing debt a large debt is a monumental task that involves a lot of budgeting and saving for what seems like an eternity. Cutting that gap between what you bring in and what you pay out is the key to paying down that debt, but it goes further than that. The order that you pay your debts off in is very important and could seriously cut the amount of time it takes you to clear all of the money that you owe. You’d think that starting with the smallest debt that is quickest to pay off first is the logical thing to do, but that isn’t always the case. In reality, you have to take each case as separate and decide based on your own personal situation. If you’re embarking on a journey to wipe your debt, here’s how to decide where you should start.


What Kind Of Debt Do You Have?

Debt is never a good thing, of course, but some debts are better than others. Money that you’ve taken out to buy a home, or for a college education is considered a good debt, in comparison to others, because it will eventually put you in a better financial position. It’s also tax deductible so it’s less of a worry than other debts like credit cards, for example. So, if you’ve got student loans, you can consolidate them with companies like but you don’t need to worry about paying them off first. Once they’re consolidated, you can make small repayments on them but, to start with, you should be putting the bulk of your extra money into paying off your bad debts like your credit cards or any bank loans that you’ve taken out.


What Makes The Most Difference?

If you’ve got a large balance of a few thousand on one credit card, and a couple of hundred on another, which one should you get rid of first? That depends on you really. On the one hand, paying off that larger debt will make the bigger difference in terms of how much money you owe. But for some people, the psychological effects are more important. Clearing a debt in full will give you the motivation to keep going. If you start with the larger debt, it’ll be a while before you get that boost, but clearing the smaller debt in a few months could help you to get the ball rolling and keep that momentum going.


What About Your Credit Score?

Having a bad credit score can seriously affect your ability to buy high priced items like cars or houses. If you’re planning to make a purchase of this kind in the future, you need to think about your current credit score. When credit score is your priority, you should review your debts and see which ones are nearest to their credit limit. By starting with those debts, you avoid hitting that limit and making your credit score even worse than it already is.


Paying off all of your debts is going to be a long journey, but finding the right starting point is half the battle.



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