Kentucky has a similar problem with consumer debt as the rest of America. Approximately 69 percent of all American households carry debt of some kind. These debts come in a wide array of different types, and each category of debt should be treated differently.
Mortgages and debts with extremely low interest rates can sometimes be safely put off in order to concentrate on more pressing obligations. Any interest rate less than five percent may be prioritized below debt with a higher rate of interest, such as car loans or student loans. Such debts commonly have interest rates around seven percent. This rate may be relatively high when compared to a mortgage, but they are not the debts that should be paid down first.
Credit card companies will frequently impose an interest rate of 18 percent or more. This makes it essential to pay off credit card debt as quickly as possible. It is unwise to invest money or make payments on most other debts until the credit card has been paid off. This is because high-interest loan has the potential to be many times more expensive than a low-interest loan. Paying it off promptly and completely might save a consumer a lot of money. Even minor increases in the size of the monthly payment might have enormous long-term benefits.
Debtors who face the threat of foreclosure or other serious financial consequences may choose to seek the advice of a lawyer. The lawyer may be able to suggest debt counseling and other paths out of debt. They may also be able to give counsel about bankruptcy filings. A lawyer would also be able to represent their client and negotiate directly with the creditor when necessary.
Source: The Motley Fool, “Debt Management 101: The Good, the Bad, and the Ugly“, Matthew Frankel, October 12, 2014