Should I pay down my student loans or my credit cards?

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Answered by James L Roberts, Independant Consultant in Lake Worth, FL
This question poses an either/or scenario between student loans and credit cards and is indicative of a larger issue, namely the lack of understanding regarding financial management and the skills required to resolve this issue. Obviously this has become an issue resulting from insufficient cash flow to pay both the student loans and credit cards. My suggestions follow a simple K.S.E. process: K is knowledge, S is strategy, and E is execute.

The first step is to seek as much knowledge as you can from trusted advisors and professionals who are willing to sit down and help you work out a strategy. It is important to gain as much knowledge as you can dealing with money management.

The internet is full of free courses and material to increase financial literacy. However, nothing, and I repeat nothing, will overshadow the benefits and help of good mentorship. I suggest focusing on developing a strategy that enables you to focus on both. The debt from student loans and credit cards was achieved over a period of time, and it is going to take time and strategy to pay them off. It will most likely require living adjustments and going without a few luxuries for a period of time if increasing income is not possible.

I also recommend in conjunction with the K.S.E. process, using the P.O.C.C.A. process. Planning, Organizing, Coordinating, Controlling, and Accountability. Acquiring knowledge and developing strategies will take planning, organization and coordination. You will have to be in control of the process and be accountable. The good new is it is possible to deal with both student loan and credit card debt, you just need to develop the strategy that works for you. | 10.13.15 @ 20:58
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 19:35
Answered by Stacy Marcus, CDFA™ CFEI™ in New York, NY
Hello, as you know you must pay down both is your question really which to pay down faster? If so, then start by considering the interest rate on each debt and the amount of the debt. In general, with a fixed sum of money to be allocated to debt repayment each month paying down more on the debt with the higher interest rate will be beneficial. For example, if your student loan debt accrues interest at 7% and your credit card debt has a rate of 20% on an equal balance you would be paying much higher interest charges on the credit card than the loan. It is extremely important to also consider the provisions of your student loan debt - consoidation, refinancing and the option to defer may permit you to retire high interest credit card debt - then cut up the cards! and then to devote all available funds to your student loans. Balancing debt repayment with current expenses and the need for future savings is what the process of financial planning is designed for. It is important for you to speak with an advisor so you do not create an even more disadvantageous position for yourself in the future | 10.13.15 @ 23:18
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 19:35
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