What is the best way to pay off debt?

My husband and I just bought a house, and we want to pay off as much as possible so we can refinance in a couple years and do some renovations. It's a really old house, 60+ years old. We will have 1 car paid off, and hopefully a credit card. We have about 40K in student loan debt, and 25K in credit card debt from college.

What is the best way to pay off debt?
All of the finance advisers that I have looked up or read about say to do the following each month:


1. Pay all necessities first-rent, utilities, car payment


2. Allow yourself some cash for things like food, clothes, etc...


3. Pay off your debts, but save about 10% of your total income for emergencies.





It is always good to have a budget each month and stick with it. And a long-term savings/debt reducing plan too.





If you are asking about which debt to pay off, I would write them all down, with interest rates, and if they have equity or not. I would start with the credit cards, because they usually have higher APRs and it is the lowest amount (you will see your efforts pay off sooner then a larger debt.) Try to pay 2x a month, one solely going to the principal. You could do this with your house too, but only if you are caught up on everything else. (Because the house is the equity and could increase in value, and I'm assuming you don't have anything tangible from the credit card debt.) I believe the student loans should have very low interest rates, and can be paid off in 10-20 years.
Reply:There are two schools of thought:


A) pay off the highest interest stuff first as this will save the most money


or


B) Pay off the smaller accounts first, becuase this will keep your 'motivation'. When you pay something off, roll the extra money into the next debt. This is called "snowballing".





Either way, its justa bout putting as much money towardsa your bills as you can.
Reply:Pay off credit cards 1st. Your mortgage interest is tax deductable and probably at a lesser rate. Student loans can also be pushed out and the interest is tax deductable.
Reply:Start with the debt that has the highest interest rate. Pay as much toward the principle as you can each month while paying the minimums on the other debt. As soon as the highest interest debt is paid, go down your list to the next highest interest rate. Keep working your way down until you are caught up. If you have any credit cards that offer low interest rates on balance transfers, that may be worth doing. Just be careful of the transfer fees, they can knock your socks off and not be worth it. Good Luck!
Reply:The best way to pay off debt is to pay a little more then what the minimum ask for. For example if one creditor wants $28 per month, try giving them $30. Set up an IngDirect account and ask for an automatic transfer. That way you can finish in No Time. Also, there is Bank of america keep the change program. Bank at this bank. Save a little here and there until all of the creditors are paid off. Good Luck
Reply:Your question is not clear. Are you asking which debt to pay first? Or, are you asking how you can earn extra money to pay your debt faster?





Pay everything on time and pay down the debt with the highest interest rate first.
Reply:if you have enough equity in your house, why not refinance to take cash out and pay off all those debts at once and have the benefit of tax writeoffs on payable mortgage interest. Once you paid them off, you no longer have a car payment, credit card payment and student loan payment - which means you can afford to save up and or pay more to your mortgage. Best way to reduce your mortgage principle and pay it of sooner is to take the monthly mortgage payment divided into 2 and make that half amount every 2 weeks.





You can use the mortgage calculator online at www.dinkytown.com to see what tremendous savings that will be.





Best wishes!
Reply:Strategies to Reduce Debt Quickly


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