Today is Friday! A payday for many, but chances are that a good portion of your money is going to student loan or credit card debts. Consumer debt plagues millions of citizens throughout the United States. Student loans and credit card debt are two of the most common types of consumer debts that many people deal with for most of their lives. To give you a better idea of how extreme this problem is, total student loan debt in the US is up to $1.48 trillion while credit card debt is up to $830 billion.
As both of these debts can be rather extreme, it can be tough to decide which should be your priority. Here are a few tips to help you decide where your priorities should be.
Consequences for Missed Payments
The good news is that both credit card and student loan debt are considered unsecured debt – meaning missed payments cannot immediately result in the seizing of your property to make up for your debts.
The primary consequence of neglecting to pay these debts is the impact it would have on your credit score. Additionally, if you miss the payments for long enough, your debts may be sold to a debt collector. However, one factor that is unique to student loan debts is that missed payments can result in the withholding of your tax return to make up for missed payments. Due to this, you may want to prioritize student loan payments.
Student loan repayment options are much more flexible than they are for credit card debt. Credit cards have minimum payments that you must make each month to stay in good standing with your credit card company. If you are not able to make these minimum payments, there are not many other options. Meanwhile, student loan lenders offer many options for people who are struggling to keep up with their monthly payments. For this reason, you might consider focusing on your credit card debt.
Generally, credit cards have much higher interest rates than student loans. As a result, credit card debts generally end up costing more than student loans – even if the original debt was smaller. While there are tax incentives to paying off student loans, high-interest rates on credit cards often outweigh the tax benefits of prioritizing student loan payments.
Lastly, if you are struggling to keep up with your payments and are running out of options, an experienced debt defense attorney will be able to help you figure out how to handle your debts through methods such as debt settlement or payment negotiations. If you would like to have a free consultation with an experienced debt settlement attorney, please contact one of my offices immediately; we are available in Miami Lakes, Orlando, West Palm Beach and Tampa.