Monday, 27 May 2024

Importance Of Debt Prioritization And Tips To Do It

You may have multiple debts and time may come when you may find it difficult to deal with all of them together to stay clear from the debt trap. In such a situation it is essential that you prioritize your debt and make payments accordingly so that your credit score is not affected very much adversely. You must know the ways to prioritize and the importance of it before you advance any further. If you prioritize your debt, then you will know which debts you should pay off first, so that you save some money and clear off your debts faster.

Categorize Your Debt

When you have multiple debts, it is important that you pay your debts off in right order. You can see it on your own that the consequence of not paying off some particular debts before the others can be severe. So, under such condition, you must look at all your debts and divide them into three categories, namely, debt emergencies, priority debts, and non-priority debts in that order. Debt emergencies like court action, disconnection, bailiff action, eviction from premises are to be dealt immediately and get independent advice on debt urgently. Your adviser will do all the urgent talks and negotiations suggesting you the ways to be followed.

Ways To Deal Debt Emergencies

If you have a court hearing, it is imperative that you turn up for the hearing. It gives you a chance to come to an agreement with your creditors. If you fail to go, then the court will be unable to know of your financial condition or the hardships that you have to face and pass judgment in your favor. Whereas, if you go then you can tell them about your situation and plans that you may have to tackle your financial debt. The court can then pass a judgment which may be suitable for you and your creditor and advice you ways to deal with their counsel organizations as well.

Dealing With Priority Debts

Priority debts do not always have high rates of interest, but non-payment of such debts can lead to somber consequences. Such obligations include secured loans like mortgage, different taxes and VAT, utility bills like power, gas, and electricity, hire purchase agreements, TV license, court fines, child maintenance and much more. Ignoring such bills may lead to losing your home, receipt of summons from the court, visit from the bailiff, disconnection of utilities and being declared bankrupt. All these consequences have a grave effect on your credit score, your credibility, and eligibility to get any loan approval in the future. For people suffering from bad credit and have debt issues the best way to get out of it is to seek for debt consolidation loans for bad credit. It will help you out in making things easy for you.

Non-priority Debts

Though the consequences of not paying your non-priority debts on time are less, you must not ignore them completely either. Obligations of credit and store cards, payday loans, in-store debts, personal loans, overdrafts, home credit or building society loans, credit from friends and family and water and sewerage bills are considered as non-priority loans. You can check online to know other ways to pay such debts faster apart from paying more than the minimum amount due of those debts having a higher rate of interest.