Prioritizing Debt
If you are having serious debt problems, you are probably having trouble keeping all of your debts up to date. You can only reduce some expenses, and available income can only be stretched so far.
You therefore have little choice but to either delay, or not pay at all, some debt repayments as they come due. In this situation you will be forced to think very hard about which payments you really should pay first. You risk several things such as your home, gas, electricity, car and even your household possessions.
Following the rules in this chapter may make the difference between keeping or losing important property.
Do Not Take On More Debt To Pay Off Old Debt.
A short-term fix can lead to long-term problems.
Many people opt to take on new debt to pay off old debt instead of delaying or eliminating certain debt payments. Very rarely is this a good idea. The option to refinance or take on new loans and when, if ever, you should do so is discussed in a later article.
Your main strategy in dealing with too much debt is deciding which debts to pay first, which you can refuse to pay, and which you can put off until later.
It is easy to be intimidated by the creditor who screams the loudest for their money but they are not necessarily the most important creditor to pay. Many times creditors who scream the most for their money do so because they have no other way to get their money.
The creditors to be the most concerned about are those who quickly take action against your home, car, utility service or any other vital assets you may have.
Pay off creditors who can take the quickest action to hurt you, not those who yell the loudest and call the most often.
You should direct your limited resources to what is most necessary for your family -- typically food, clothing, shelter, and utility service.
Since there is no 'wonder list' which gives the specific order in which debts should be paid, you should use this article as a general reference guide and make more decisions based on this information and your particular circumstances.
Debts with collateral are top priorities.
There is one thing you should bear in mind when deciding which debts to default on and which ones to make a priority to pay, and that is the idea of 'collateral'.
Collateral is defined as a physical object stipulated as being used as an object of value which will be recovered in the case where non-payment of a loan takes place, usually your home (mortgage) or car (car finance).
A creditor may also have collateral in your household goods, business property, bank account, or even wages. Collateral can take many forms. When a creditor has taken collateral for your loan, it has a "lien" on your property.
Determine which of your debts are 'secured' and which are 'unsecured'.
You should almost always pay secured debts first. Creditors who have collateral are usually referred to as "secured" creditors. They have the security of knowing that if you don't pay, they can take the collateral from you and sell it to get their money.
Creditors without collateral are often referred to as "unsecured." It is usually hard for unsecured creditors to collect what they are owed unless you pay voluntarily.
The idea that debts with collateral are the most critical may seem very simple. Unfortunately, it is difficult to keep this simple concept in mind when you are getting hassled by debt collectors trying to force you to pay your lowest priority debts.
It is extremely important to remember this concept as you make decisions about your financial future. - 15224
If you are having serious debt problems, you are probably having trouble keeping all of your debts up to date. You can only reduce some expenses, and available income can only be stretched so far.
You therefore have little choice but to either delay, or not pay at all, some debt repayments as they come due. In this situation you will be forced to think very hard about which payments you really should pay first. You risk several things such as your home, gas, electricity, car and even your household possessions.
Following the rules in this chapter may make the difference between keeping or losing important property.
Do Not Take On More Debt To Pay Off Old Debt.
A short-term fix can lead to long-term problems.
Many people opt to take on new debt to pay off old debt instead of delaying or eliminating certain debt payments. Very rarely is this a good idea. The option to refinance or take on new loans and when, if ever, you should do so is discussed in a later article.
Your main strategy in dealing with too much debt is deciding which debts to pay first, which you can refuse to pay, and which you can put off until later.
It is easy to be intimidated by the creditor who screams the loudest for their money but they are not necessarily the most important creditor to pay. Many times creditors who scream the most for their money do so because they have no other way to get their money.
The creditors to be the most concerned about are those who quickly take action against your home, car, utility service or any other vital assets you may have.
Pay off creditors who can take the quickest action to hurt you, not those who yell the loudest and call the most often.
You should direct your limited resources to what is most necessary for your family -- typically food, clothing, shelter, and utility service.
Since there is no 'wonder list' which gives the specific order in which debts should be paid, you should use this article as a general reference guide and make more decisions based on this information and your particular circumstances.
Debts with collateral are top priorities.
There is one thing you should bear in mind when deciding which debts to default on and which ones to make a priority to pay, and that is the idea of 'collateral'.
Collateral is defined as a physical object stipulated as being used as an object of value which will be recovered in the case where non-payment of a loan takes place, usually your home (mortgage) or car (car finance).
A creditor may also have collateral in your household goods, business property, bank account, or even wages. Collateral can take many forms. When a creditor has taken collateral for your loan, it has a "lien" on your property.
Determine which of your debts are 'secured' and which are 'unsecured'.
You should almost always pay secured debts first. Creditors who have collateral are usually referred to as "secured" creditors. They have the security of knowing that if you don't pay, they can take the collateral from you and sell it to get their money.
Creditors without collateral are often referred to as "unsecured." It is usually hard for unsecured creditors to collect what they are owed unless you pay voluntarily.
The idea that debts with collateral are the most critical may seem very simple. Unfortunately, it is difficult to keep this simple concept in mind when you are getting hassled by debt collectors trying to force you to pay your lowest priority debts.
It is extremely important to remember this concept as you make decisions about your financial future. - 15224
About the Author:
Ian is someone who has come through a very difficult time financially. He used credit debt consolidation to ease his situation markedly. Without good debt consolidation advice he would have certainly gone bankrupt.
