Too many Americans never achieve financial freedom because of a mountain of debt. The average household owes more than $203,000 on mortgages, student loans and credit card debt.
Knowing how to rank your debt can open up new opportunities and improve your credit score.
Debt is bad! Paying off your debt is good! You don't need to rank your debt, just pay it off as quickly as possible.
So, you're broke. You have some bills, but more importantly, you have a lot of debt. Chances are that you're late on your credit card payments and mortgages, and maybe even struggling with student loans.
Rank your Debt with the Avalanche or Snowball Method
The debt snowball method isn’t as well-known but might be the better choice. Instead of ranking your debt by interest rate, you list your accounts from smallest to largest and make extra payments on the smaller debts first.
Ranking your debt by credit score factors means putting the non-revolving debt on top of the list to pay off first. As your non-revolving debts drop off, your credit score increases and you get access to cheaper credit.
1. Payday loans (Worst!) 2. Credit cards 3. Car loans 4. Business loans 5. Mortgage Debt 6. Student loans