Those with a mortgage, auto loans, student loans, and credit cards know that these debts are slightly different. Experts therefore suggest borrowers consider different methods of paying these various types of loans, rather than using the same approach for each. By using tailored plans for each type of debt, borrowers can pay their balances faster and save money in the long run.
Mortgages – Experts suggest focusing on other types of debt before the mortgage. This is because most mortgages have a fairly low interest rate compared to credit cards and other types of loans. Homeowners can also deduct their mortgage insurance on their annual taxes. Those wanting to pay this loan down should aim to make at least one extra mortgage payment every year.
Auto Loans – Most experts suggest that there’s no need to rush to pay an auto loan because these are also fairly low-interest. This is a much shorter type of debt and can be paid quickly by those who wish to do so. One strategy is to pay half your monthly payment every two weeks. This adds up to one extra payment each year that goes straight to the principal.
Credit Cards – These loans should be paid down as fast as possible every month because of the large interest charges. If you have several cards, pick the card with the highest interest rate and pay it first.