One of the biggest mistakes I’ve seen people make is rushing to pay off debt and then recharging it  because they paid off more than they could afford. Use these easy tips on how to pick which debt to pay off first, get free money for student loan repayment, and reallocate expenses as children age. For instance, when diapers are no longer needed, the expense can be reallocated to debt pay off or college savings.

Pay Off Federal Student Loans Last

While federal student loans are often your largest debt, they are the worst to pay off first. Why? These loans have the most options for breaks from payments when you have a financially difficult situation than any other bill. You can’t call your mortgage company or land lord and ask to skip making payments on your home for 3 years, but you can do this with your student loans.

Pay Down Credit Cards Considering Both Credit Rating and Interest Rate

It’s a myth that paying off your highest interest rate is the best way to pay off your debt quickly. The reason why is if you pay off the highest interest rate card first and your other credit cards still have balances, you can hurt your credit and potentially cause your interest rates to rise. The reason why is credit scoring is partially based on the percent of your limit you are using. This is calculated on both individual cards and your total credit card debt. If your credit score is lower, you may also end up with higher home or car loan rates. Your insurance rates can also be affected by credit rating.

Negotiate Interest Rates

One of the best ways to reduce your time to repay your debt is to get your interest rates dropped. If you have good credit, call your credit card companies and ask them to reevaluate the rate you’re paying. If your credit rating is not so great right now, wait until you’ve paid down each of your credit cards a bit. Ideally, your credit cards shouldn’t have balances above 10 to 25 percent of the total limit. Don’t pay all  your bills with a card and pay it off at the end of the month. I use myFICO to check my credit score, and it has a calculator that shows you how to improve your score quickly based on your own information.

Don’t Avoid Credit Cards if Rebuilding Your Credit

It’s logical to think if you’re trying to reduce your debt then you should close your credit cards and focus on paying them off. Not true. Your credit cards help your score more if they’re open. You also should get a new card if your previous cards were charged-off. The reason why is that so much of your credit score is based on how your handling your current accounts. If you don’t have current accounts, your score will be lower.

Decide on a Monthly Payoff Amount Based on a Budget Instead of Debt Level.

If you decide on how large of a monthly payment to make based on your debt level instead of your budget, you’re going to end up recharging your debt and then some. Look at your budget and see what you actually have available for repaying debt. Then see what would happen if you made a few painless cuts. Check-out X and X articles for help to trim your budget.