Which Debts to Pay Off First?

Which Debts to Pay Off First?

Great question! We hear this one a lot.

First, NEVER miss the minimums due on any debt. Then, with the extra you have left, proceed in this order:

Bad Debt Comes First

Start by attacking your bad debt. Simply put, your credit card debt is bad debt, so pay it off as soon as you can. Prioritize the obligations with the highest interest rates. Paying off the highest, most toxic debt will free you up sooner and help you pay less in the long run. Plus, it will take a load off of your mind.

NOTE: Do this in addition to paying your minimums on all bills. Never miss payments for any of your other debt in order to pay off your credit card faster. (Car loans also fall into this pile of bad debt.)

An Emergency Fund Is Your Security Blanket

After you’ve conquered your credit card debt (but before you start paying off more than your regular minimums for student loans), pause, take a breath, and congratulate yourself. Now, make sure that you have a solid emergency fund. You should aim to save up six to nine months’ worth of living expenses. That way, if you lose your job or are hit by a catastrophe, you will feel much more secure. Trust us: This is a security blanket for your peace of mind.

Finish Up With Student Loans and Other Debts

Once you have a solid emergency fund, focus on your student loans (or your mortgage, if you have one). As before, pay off the loans with the highest interest rates first.

Find a Careful Balance

As you go forward, look at your interest rates to decide whether to put your money toward additional savings versus polishing off debt. For example, if you were earning 2% interest from your high-yield savings account but paying 6% interest on your student loans, then it would probably make more sense to finish paying your student debts before funneling your money toward savings.

Though the end of the tunnel might feel far away, you’re on the right track—LearnVest will help you get there!


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