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How to Classify Your Debt

Debt can really sneak up on you if you are not aware of the situation. So, in order to pay off that debt quickly and efficiently you need to know how each one works. In order to help, here is a short list of how debts tend to rate. There is an example of the very bad debt, and an example of debt that is not as bad as the rest. Classifying debt can really help you eliminate it.

Debt: Not Good, Just Levels of Bad

  • Very bad: credit card debt

This is a very bad debt because it can really follow you around for a very long time. If you get too far in credit card debt, then you may not be able to get out very fast because of the interest rate. This interest can truly be a killer, depending on the rate you got the card at. Say you got the card at an APR of 19% (which is possible), then if you have a large debt you are in for an extremely tough time. If you get too far in debt, if will be hard to apply for a lower rate card to do balance transfers on. So it can really turn on you hard.

  • The “I guess it is ok” debt: student loan

Even though you are in debt, you can see there are benefits to this. You are getting a higher education, which can actually make you more money in the long run. If you take out a loan to get your Masters, then you know you will be in good shape later on. So debt is always something to worry about, but student loans may cause you to worry cause a little less. This is because of the added benefits there are that you can use the student loan for.

  • The “not fun, but not the worst” debt: auto loan

Car loans are tough. They may not be the largest debt that you can have. But they are not fun by any means. This is because of the nature of the car itself. If you get in an accident, or your car breaks down, you are out of luck. You cannot get out of that debt, and now you may not have a car. So what do you have to do? Yeah, get another loan for a new car. Thus pushing you even deeper in debt. In order to fight this, you might want to try used cars. Sure they are not as fun, but they save money. You can help your way around these tough debts.

Learn About Debt and Take Control

The more you know about the effects of the different types of debts the better. You do not want to look at all debts as being equal, because they aren’t. Some should be paid off quicker than other because of the complications they may hold. So just know what is going on and everything will work out in your favor. That should be your goal.

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