Finance & Loans
Facts about four kinds of debt
December 3, 2014 by elegant · Leave a Comment
Many financial experts advice certain debt to be paid off now before others while other types of debt can wait a little longer. Here we are attempting to reason out what to do with four type debt; mortgage, credit card debt, student loans, and car loans.
Your mortgage: Pay off later instead of now. This is the largest debt many of us carry and the largest investment we make. It still provides you with a tax advantage due to deductibility of interest. When it comes to paying off your mortgage and saving for retirement, the latter should be considered over pay off of your mortgage. However, if you inherit large sum of money or win a lottery, paying off the mortgage is not a bad idea to reduce all debt.
Credit card and other revolving debt: Pay off now. They come with higher interest rates, no tax advantage, and paying off of it now may get you out of a vicious circle of debt.
Student loans: Since you can’t wipeout a student loan even in a bankruptcy, pay it off later. You may be able to get a tax advantage on the interest you pay on the loan.
Car loan: Pay it off sooner since there are no other advantages for keeping it longer.