All too often, people with good intentions make horrendous financial mistakes. But you don’t have to. Learn how to avoid making bad debt mistakes, and sleep better tonight.

The 4 Worst Debt Mistakes

1. Paying off small debts first: This is a common mistake. People think that because a debt is small, it’s easier to pay it off. Tackle your highest-interest-rate debts first, and make minimum payments on the lower-interest-rate debt. After you have paid off the highest-interest-rate debt, work on the debts with the next highest interest rate, and continue making minimum payments on the lower-interest-rate debts. To determine the interest rates on your debts, contact all of your creditors and ask how much you owe, what your current interest rate is, and what your minimum monthly payment is.
2. Using a home equity loan to pay off unsecured debts: This is a big no-no! Don’t mix money. It’s dangerous, and it can be disastrous. By adding unsecured debt to your mortgage, you increase it. Any increase in debt increases the risk that you won’t pay your debt. You don’t want to lose your home because of charges you made on your credit card. Keep unsecured debts separate. If you can’t pay your unsecured debts, all you’ll get is a collection call. Add it to your mortgage, and you could get foreclosed.
3. Using your credit card to pay for daily living expenses: Don’t use your credit card to pay for your groceries or utility bills. Use it to pay for your big ticket items and online purchases. When you use it for online purchases, these are covered by consumer protection laws. Just remember to pay off the charges for your online purchases in full after you receive the bills. Use cash or your debit card to pay for your everyday living expenses.
4. Making minimum payments on credit purchases: If you are only making the minimum payments on your debt, stop it now. You run the risk of paying more than the original purchase price. Here’s an example of an $8,000 credit purchase:

• Credit purchase: $8,000
• Interest rate: 18 percent
• Minimum monthly payment: $200
• Years to pay off: 5
• Total interest paid: $4,308

Avoid paying that type of interest by paying at least three times the minimum monthly payment.

Getting out of debt is a laudable goal. In order to get out of debt faster, avoid making the worst debt mistakes that anyone can make. Soon, you’ll start feel the pain and agony of debt lift from your life.

Image source: Wikimedia Commons

This article was syndicated and originally appeared on the CESI Debt Solutions website.