A person who has a family to take care of should never try and take a loan. Once you take loans, paying it off can become difficult. Even a small amount of credit is hard to pay. However, if you have several debts, you need to prioritize debt consolidation. You need to know which debts you should pay first and why. Here is how you can do this.
Paying off debts in the right order
The question is, why is paying debts in the proper order necessary? The reason is that the consequences would be severe if you do not pay some debts before the others. Therefore, you should make three categories of your debts and split them into emergency debts, priority debts, and non-priority debts. If you can’t pay all of your debts, focus more on emergency debts than non-priority debts.
There are several debts which can fall under this category. These are the debts which you have to pay in the next few days. These debts include:
Eviction for mortgage or rent arrears
Make arrangements for paying these debts first. If you don’t have money, get debt advice from experts. A mortgage advisor is a lawyer who can talk to the court on your behalf. If you have court sessions, make sure that you turn up on time. It will provide you and your advisor a chance to talk to the judge. If the decision is not made in your presence, it can be injurious for you and result in a significant loss.
What are priority debts?
These are the debts whose interest keep on increasing if you do not pay. You could lose your home or other property if you do not pay off these debts. Not paying these debts can have dire consequences. Priority debts include:
Mortgage or rent
Loans secured against your home
Gas and electricity bills
Hire purchase agreements
You must pay these priority debts on time; otherwise, you might:
Lose your home
Receive regular court summons
Be visited by bailiffs
What are non-priority debts?
These are the debts which you can pay later. They do not have any serious consequences. For example, loans that you take from a friend or family member are non-priority debts. Credit card debts and debit card debts also fall under this category. Here is how you can pay non-priority debts.
You should pay the debts with the highest interest rate.
Pay those debts first against which you can receive a penalty.
This is how you can manage your debts quickly and easily. You need to prioritize your debts and have a proper plan for paying them off. It is important not to take any loan that you can’t pay off. You should also prepare a budget which will save you both time and money and give you a chance to stay away from debts.