The Experts Reveal the Battle of Debt Supremacy Between Student and Mortgage Debts
When it comes to debt, most Americans only think of two major debts they carry on their shoulders: mortgage and student loans. But which debt is taking a worse toll to pay off? Here’s what the financial experts have to say.
The Battle
For many years, a home mortgage debt used to be the biggest debt a person can take on. Not only does one have to pay its hefty amount of equities and monthly amortization, it also takes 20-30 years to pay off your debt. According to the financial experts, most people spend half their lives paying their debts.
But according to MagnifyMoney, student loan is on the rise to grab the top spot. Aside from the principal amount of both debts, Magnify Money also studied the medians to determine the number of people getting into debts.
According to the company’s senior research analyst Kali McFadden, the averages can tell you the range, but the median will give the public a better sense of what’s happening and how the community is affected by these debts.
According to the study, most borrowers living in major cities where home prices are on the lower side have an increasing number of student loan debts (and vice versa). According to McFadden, this means that two numbers are moving closer and affecting each other.
The Statistics
McFadden adds that mortgage debt is lower in cities with cheaper homes and affordable housing like in Pittsburg. For instance, around 12.6% of borrowers owe more debts to their education than to their homes.
Aside from that, McFadden adds some factors affecting the lower number of mortgages like the holder of a mortgage could be the parents instead of the student. Or if the student may have both loans and 20 years to pay in mortgages, but has higher interest rates in their federal student loans.
McFadden says most older people have more mortgage rates than student loans, while the millennials, especially those who are in the professional fields have thousands of dollars in their student loan debts.
On Paying Off Debts
Whether you have a mortgage or student loan, the financial advisors gave these tips to help you pay off your debt quickly.
Create a Budget.
Bakke recommends you use a personal budget and finance tool like Mint.com to input your monthly income, expenses, and savings. If not, you can even do the listing on Excel spreadsheet or the traditional pen and calculator ones. Allocate your monthly payments ahead of time to avoid getting tempted to buy things you don’t need.
Pay Off Your Most Expensive Debt First
Try sorting out your debts to determine which one has the highest interest rates. The sooner you pay off your most expensive debt, the more money you can save and use to pay off your other smaller debts. It also helps improve your credit score too according to Bakke.
Pay More if Possible.
Sticking to simply paying your minimum balance is good. But paying more than your minimum balance is a better way to pay off your debt earlier according to the experts. In this way, you’ll be paying a lesser amount each month as you accumulate your funds until you’ve totally paid it off without you realizing it.
So, if you have an extra money from bonuses, the financial experts recommend you allocate a portion of it to pay off your debts more.
Delete Your Credit Card Information.
According to Bakke, most people tend to buy unnecessary things due to back-to-back sales and discounts. While these marketing strategies are good, it can destroy your budget if you’re reckless in your expenses. Deleting your credit card information from online retail stores can help you fight back the temptation to spend mindlessly.
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