Most of us reach a point in our lives where we have to decide whether to pay off debt or invest extra money. Joshua Kennon, who helps people deal with their debt, says the following. There are two types of debt: those with high interest rates and those with low interest rates. Credit cards are in the first group. They have a higher rate of interest, so if someone has a lot of debt to pay off in the form of credit card payments, he should only focus on paying off the interest from the credit card and not worry about investing. When it comes to the second type of debt, which has a lower interest rate, it's best for him to put his money into investments that give him a higher return. Mr. Kennon says that there are two things to think about: a. What is the rate of return on the investments? b. What is the interest rate on each of the different debts? Only if a person can convince himself that paying off a debt would make his life easier and increase the amount he saves every month.
Steve Bucci, an expert on debt, says. One way is to pay off smaller, easier-to-pay debts with similar interest rates. The other is to pay off larger debts with higher interest rates. The second option is to pay off the debt with the highest interest rate, such as a credit card. So, when a person pays off a few debts, he feels good about himself and can start thinking about the next debt he needs to pay off or the investment he wants to make. If a person has debts with high interest rates, he or she can pay off the ones with the highest rates first. This will leave them with more money so they can pay off their other debts. But no matter what the choice is, each person must pick the one that fits him best and makes his life easier. Steve Bucci says that paying off debts should have an effect on a person's credit score. When a person starts to pay back what he owes to lenders, he has less debt and his credit score goes up. In the long run, this would help him when he needs to take on a bigger debt to invest in other things.
