Considerations when pay off my debt

2007-03-08 10:33:40

( Financial )



All people often repeat the question how do I get a loan. But after being able to avail of the loan the next problem that faces borrowers is how to pay off my debts. Some people are still not yet financially stable when the time comes for them to pay off their debts. On the other hand, there are some that consider investing their loaned money in investments.

But generally speaking, it makes more sense to pay off my debt as soon as possible because the interest rates on debt are usually higher than the rates you will get when you deposit it in banks or even in the money markets. Also, the interest income you generate is sometimes eaten by the tax you have to pay for that income.

However there are good reasons to pay off my debts as soon as the ability to pay arises while at the same time maintaining a portfolio of investments. But the first step is to consolidate my loans so that the interest rates would become lower. You can get help in consolidating your loans by hiring a debt counselor who will talk to your creditors on your behalf.

On the other hand, setting aside funds in case of an emergency also makes sense even if your interest payments would slightly be higher. This fund would be your cushion so that you will not become too vulnerable financially. Also, considering having the attitude of savings after pay off my debt would be financially rewarding in the long term because you have funds you can draw from when the retirement period comes.

Ultimately, the decision whether to pay off your debts or invest is up to you. But remember that there is no right or wrong answer because the correct solution to all this is finding the perfect balance of the two.


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