Are you swarmed with debts? It can be overwhelming when you are juggling several debts and trying to pay them off at once. Knowing how to prioritize payment is therefore a crucial step when you need help with debt. It can clear your debts faster and enable you to get back towards a healthier financial path.
Importance of Paying Off Debts in Correct Order
This is one aspect of debt payment that those who suffer from financial hardship fail to consider. The impact on their financial health for the long term comes with devastating consequences. If you are struggling to meet repayments on your debt, it is important to get organized. Write down your debts and divide them into the following categories: debt emergencies, priority debts and non-priority ones. With these categories, you will be able to identify which ones to pay off first and which ones can wait a little bit later.
A debt emergency is the highest priority level out of all these kinds of debts. You need help with debt because of a court action, possibility of disconnection or eviction from your property. You need to address them within the time frame stipulated for each case to avoid more hassle in the future.
Identify Priority Debts
Priority debts are called as such due to the gravity of the consequences involved if you wait later to pay them off. Needless to say, you should put any money you have towards paying off these bills. Priority debts can include your mortgage payment, gas and electric bills, income tax, and child maintenance, to name a few.
When you do not consider other debt relief options, you could be in bigger trouble. You should therefore make it a priority to pay them off or put in additional payment when you have extra money.
Tips for Paying Non-Priority Debts
Even though there is a lack of urgency involved when paying off non-priority debts, when you employ an organized approach, you could be out of debt faster than you think. The first tip to consider is to pay off the most expensive debt or those with the highest interest rates. It is also important to prioritize payment for debts that charge steep penalty fees. Once you cleared off the most expensive debts, it gets easier to repay the other debts you might have.
Why Consolidate Debts?
When all else fails, you can always turn to debt consolidation. This method of debt repayment is popular for those who need help with debt as it makes repayment manageable. But before you proceed to consolidation, it is important to seek debt advice from a professional first. This will ensure that you have considered all other options and consolidation is the soundest option. Practicing responsibility with how you handle your finances from here on out is also going to prove crucial. You cannot be lax just because the loans are rolled into one – you should still strive to pay off the newly consolidated loan within or before the length of the loan term. Read more Debt Helpline