Paying Off Your Bills

Paying Off Your Bills

Suppose you have a student loan, a car payment, and a credit card with debt. The student loan debt is $4,000 with interest at APR 8 percent. The car loan is $8,000 with APR of 4 percent. The credit card debt is $1,500 with APR of 18 percent. Your grandmother sends you a check for $1,000 for graduation. Which bill would you put the money towards?

Question:

Which bill would you put the $1,000 towards?

Answer:

The credit card debt $1,500 with APR of 18 percent

Explanation:

When prioritizing which debts to pay first, one should consider the obligations with the highest interest first. Credit card debts are known to be among the top interest earners.

With $1,000, paying off the $1,500 credit card debt will be the most prudent decision. The credit card debt has an APR of 18 percent, which is the highest in the list. The liability is the least in terms of amount but the most expensive in terms of interest payable. Credit card debts have adverse effects on credit scores. The sooner they are settled, the better.

Settling the credit card debt will present savings on interest payable as well as help maintain good credit scores.

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