Debts come in many forms. This explains why we have good debs and bad debts. We can classify student loans as good debt, while credit card debt fits the category of bad debts as it is not tied to your survival. The same principle applies to fat – not all fats are bad as the medical professions made us aware. There are good fats essential to your health, like cheese and dark chocolate. Besides, survival might be impossible without good fats. There are also bad fats like margarine and French fries.
Even though both credit card debts and student loans are both debts, they are not created equal. This, however, does not mean you should amass the "good" debts. In the same way, it will make no sense to eat a lot of cheese: the consequence will be devastating.
Now that you know these debts are not created equal, you can come up with ideas that work for you. Since there is a recent relief for federal student loans, you have quite a lot of options to take care of what you have.
Put your money in an online bank with considerable yield. This will give you some cash back as interest. Even though the interest is not much, it will make some difference. As a result, putting your student loans forward makes sense as long as taking the lump sum out before 09/30 will be possible. This means the entire money will serve as the capital, which can help you pay your student loan on time.
Without a doubt, we are in trying times. Our health, safety, and shelter come first above every other thing. As a result, prioritize expenses on home, health, and mobility. If you do not make provision for this, every other stuff might not matter.
One of the reasons why student loan is good debt is because of the low-interest rate. Compared to the credit card interest rate, it is reasonable. As a result, it makes sense to take care of credit card loans first. Now that we have the option of federal relief, it is the best time to make this happen so prioritize it above any other thing
This is not going to be palatable for many, but it is a smart idea if you have the heart. We believe it is smart because of two reasons:
• Your payments will be taking care of the principle and interest, which will mean paying off your loan faster.
• The payment keeps taking care of itself; hence it does not rely on your ability to keep the autopay feature going.
These entire options are legit and tested. There is no best option, as well. It all comes down to an individual and what works for you in addition to your financial plan. You are in the best position to decide that based on the data you have and your prevailing situation.
Elliot Kravitz, ATP