This goes for any nondeductible, high-interest debt. Interest payments are typically very high and they can't be deducted from your income before taxes..
How to pay down your debt.

  • Draw up a budget and stick to it. By limiting nonessential purchases and decreasing your high-interest debt, you’ll free up money for other things.
  • When possible, make more than the minimum payment on your balances. Start with the credit card or loan with the highest interest rate.
  • Try negotiating with credit card companies for a lower interest rate.
  • Consider a home equity loan. The interest rate is usually lower because the interest payments may be deducted from your income and the loan is secured.†

Footnotes

* Source: “Digging Yourself out of the Hole” by Carrie Schwab Pomerantz, Chief Strategist, Consumer Education, Charles Schwab & Co., Inc. and President, Charles Schwab Foundation, September 21, 2006.

†With home equity loans and lines of credit, the financial institution will take a deed of trust to secure the debt. You could lose your home if you do not meet the obligations in your agreement with the financial institution. Shop for the credit terms that best meet your borrowing needs without hidden fees and prepay penalties. Interest rates may be tax-deductible. Consult your tax advisor.
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