Welcome to Learn Now or Pay Later a financial
wellness series, brought to you by Cambridge Credit Counseling. We’re hoping to provide you with a better
understanding of the financial challenges that confront you each day. Through education and advice you can build
a strong financial future, Cambridge can help. Donnie Moorehouse with Chris Viale, we’re
talking about paying off debt and Chris just gave me some tips on paying off debt. Sure, you want to create a plan to try and
pay down your debt faster and it’s pretty easy to do that. You can try two different theories, there’s
a roll-down theory, or pay account off theory. Pay account off theory is more for the consumer
that wants to see immediate results, and what you would do in that type of theory is you
take your smallest credit card that you have, and you focus on getting extra money to pay
that account off first and then you move on to the next highest credit card from there. The roll-down theory is you take your credit
card with the highest interest and apply any additional money to that card first. That gets your money working a little bit
better for you in regards to the finance charges your being charged but the key thing in both
events is that you’ve got to be focused on building savings at the same time because
if you have an emergency you want to have money to fall back on and have to worry about
using a credit again. Okay, now here’s the question do I pay more
than the minimum? Yes, you want to pay a little more than a
minimum, but you also want to be careful because the credit card companies, if you’re religiously
paying more than a minimum each month they’ll start to bill you for less or they’ll give
you a payment holidays. So, paying a little bit more than a minimum
on your statement sometimes isn’t going to achieve the results you’re looking for. What you really need to do is set a certain
dollar amount, let’s say it’s a hundred dollars a month that you going to pay to that
account and religiously do that regardless of what the statement shows your minimum payment. Now, what about using the equity in my home? Absolutely not, there’s advice out there that’s
a good thing to do. You’ll have tax savings you get to free
up your credit card debt, get a lower monthly payment of the tax savings is very little
so there’s not much savings there and you run the risk of taking unsecured debts carrying
them against your home. If you have trouble making your home payment,
you can lose your home. This is unsecured debt; you’re better off
trying to create a plan, cut your spending to pay down your debt on your own, absolutely
not. Thanks Chris. Thank you for watching. For more information on this topic, or to
receive personalized advice from a certified credit counselor contact Cambridge today.