SMART INVESTOR: Sometimes The Wisest Investment Is Paying Down Debt

Jocelyn via FlickrHousehold credit debt may be dwindling, but that doesn’t mean Americans have given up their love for debt. 

Nonrevolving debt, like auto loans, student loans, and mortgages, rose by $9.68 billion in March 2013, according to the New York Fed.

There really is no downplaying the crippling impact debt can have on your overall net worth. Though it makes sense for individuals to simply try to earn more by investing, sometimes it’s smarter to know when to stop and focus on the debt in front of you.

“By paying down your debt, you guarantee a rate of return equal to the interest rate you pay on the debt,” writes Sterling Raskie, MSFS, CFP, a fee-only financial planner at Blankenship Financial Planning in New Berlin, IL.

“For some debt, it’s a better return than the stock market might bring. Even if you have good credit, it’s hard to come by an annual percentage rate of less than 15%, but a 15% annual gain in almost any investment is exceptionally good.”

If numbers speak to you louder to than words, just plug in yours in Bankrate.com’s minimum payment calculator to see how much you’ll pay for leaving debt to linger.

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