Which Debts Should You Pay First?

Paying off debt is a great way to build your long-term financial security. It isn’t easy, but the most effective way to wipe out your debt is to have a plan. For example, some experts suggest that you focus on paying off your smallest debts first, while making minimum payments on the larger ones. As you pay off each debt, you apply that payment to the next-smallest one. It’s an approach that works for many people, because it provides the satisfaction of seeing each debt
disappear.

Keep in mind, though, that some debts are more important than others. For example, you
need to make a full mortgage payment every month. If you have a car loan, and don’t make the
full payment, the dealer may repossess your car. And if you start missing loan or credit card
payments, you’ll find it harder to get the credit you need.

The best way to keep debt under control is to be careful about using it. It’s very simple to use a credit card to buy something you want but really don’t need, or to take a vacation you really can’t afford. It may be tempting to take a bigger loan and buy that fancy car instead
of a more affordable model. Decisions like that add to your debt. The more careful you are about spending money in the first place, the less you’ll have to worry about bills.

What should you do if you’re not sure how to pay off your debt? One approach is to sit down with a financial expert, such as the manager of your nearest Indiana Members Credit Union, an accountant, or a financial planner. An expert can review your situation and give you practical advice about the right steps to take to start you on the road to stronger finances.

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