Paying Off Debt

You borrowed the money and to your surprise the bank, credit cards, student loan companies and your family all want it back. Well, since we can’t tell them that Jesus paid it all, it is best to come up with a plan to pay it back. The hardest thing about having a lot of debt is trying to figure out who you should pay back first. I personally feel that personal loans should be paid back first because it is rather awkward to encounter your friends and family and spend money in front of them and come across as if you have no plans on paying them back. So, take care of those debts first. After that, it is best to actually write down all your debts, current minimum payments, when they are due and the interest on each account.

Some finance experts recommend paying off your highest interest loans first while others recommend paying off your smallest balance first. This is really a personal preference. Paying off your highest interest loans makes financial sense because the more interest you have to pay, the more money you are giving to the bank. However, there are some people who need to feel a sense of achievement when paying off their loans. Therefore, paying off the smallest loans first makes them feel as if they are slowly chipping away at their debt. No matter what your personal preference is, you need to plan with an end in mind.

This friendly Debt Repayment Calculator can help you determine how long it will take you to pay off a large lump sum of money over a desired period of time or a fixed payment amount that you feel that you can afford. Using the calculator, if Sabrina has $40,000 in school debt with a 5% interest rate and her goal is to pay off her loans in 7 years, how much will Sabrina need to pay per month to achieve this goal………..$565. Or, if Sabrina knows that she can afford to pay $800 a month, how long will it take her to pay her loans? 57 months.

Just remember, when you make late payments or no payments on your debt, this reflects negatively on your credit score. So, if one day you plan on purchasing a car, buying a home or applying for a job, it is best to have good credit. In the upcoming months we will discuss credit scores and their impact on your life.

Your Fiscal Fitness Trainer,

Selena J. Roker