Depending on how much debt you owe, paying it off might take a long time, especially when it comes to payday loan debts. It’s all too easy to lose enthusiasm and give up, particularly if you have other financial priorities. As a result, it’s critical to devise a repayment strategy.
You could be worried if you have a lot of debt. Fortunately, there are several best ways to repay your debts that can assist you in prioritizing your debt payments.
In this review, Nick Wilson, CEO of AdvanceSOS and experienced loan officer shares how to prioritize and determine which responsibilities to pay off first in order to save money and pay off your debts faster. AdvanceSOS is a loan aggregator. The fast and easy application helps you reach all licensed lenders and get payday loans in Tennessee, Texas, Florida and other states.
Taking Control of Your Debt
Gather the following information about all of your obligations, such as the total amount owed (balance), and then pay the smallest amount feasible. Then, once you’ve determined the yearly percentage rate, you’ll need to figure out when the payment is due.
You can usually find the information on your bills in the mail or online if you have an account that allows you to see them.
Make a note of everything you owe and break it down to start fighting your debt. From the greatest to the smallest, list all of your debts, including any money borrowed from family or friends.
If you are unable to discover this information, contact your debtor and request it. They should be able to help you find what you’re looking for.
The two most important pieces of information they’ll ask for are your balance and interest rates, so be sure you have them before proceeding. This may be easier if you have a budget in place. After that, you may begin classifying them according to their urgency. Your highest-priority debts will be listed first, followed by lower-priority debts.
Why is it critical to pay debts in the correct order?
If you cannot meet your loan repayments before other obligations, this might have far-reaching effects. So, if you’re having trouble making your payments on time, take a look at all of your bills and divide them into three groups.
First, you should stack bills that are of the highest priority. In the second group you can list not so important bills and debts. And third, you can ensure this group is filled with emergency debts.
Debt emergency?
If you’re dealing with an unexpected emergency, such as court or bailiff action, disconnection and eviction by bailiff for mortgage or rent arrears, there are some ways to help you get along with those problems. Those who fail to prioritize their emergency debt may be taken to court.
Seek free, unbiased debt counseling as early as possible. A debt adviser will be able to speak on your behalf to the court, bailiff, or creditor. They will also make suggestions for what will be your next step.
Always be on time for your court appearance. It provides you the opportunity to reach an agreement. Some courts work with organizations like Shelter or Citizens Advice, which can provide you with last-minute assistance. You should strive to locate someone trustworthy 24 hours before your court date.
In case you don’t attend, the court may make a decision without considering your situation; but, if you go, you may inform the court what’s going on, which may aid them in reaching a more favorable decision for you. Therefore, avoid signing bad credit loans.
Priority Debts Are Debts that Must Be Paid First
Although your highest priority obligations may not be the most significant nor have the highest interest rates, neglecting to repay money due can result in serious consequences, including jail time.
The responsibilities that you should pay off first, such as court penalties or municipal taxes, are important. Following that are television licenses, children’s care, and home expenses such as gas, electricity, and heat. This category may contain VAT, income tax, and national insurance, as well as a mortgage, installment loans expenses, rent, or any other obligations owing to your house.
If you’re missing important payments owed to the DWP (Department of Work and Pensions) or HMRC, you should use a hire purchase arrangement (HM Revenue & Customs).
Why should you pay off your priority debts first?
Failure to pay up priority debts may result in consequences. Firstly you may be visited by bailiffs and get called up to court. Then, for example, if you owe delinquent debts, you could have your heating or lighting turned off which is very uncomfortable, or even be declared bankrupt as a result of not paying your expenses.
Furthermore, if you are late for your mortgage or rent, that could lead you to lose your house and cause you deeper trouble. To be precise, jail time can also be given for failure to repay the money owed. In that case, it's important to avoid deals when you are unable to meet your loan repayments.
What Are Non-Priority Debts?
Not paying non-priority debts has fewer significant repercussions. If you don’t pay your non-priority obligations, your creditor may file a lawsuit against you or hire bailiffs to collect money from you.
Among your non-priority debts included are overdrafts and personal loans (especially loans from banks or building societies). Obviously, there are credit card debts and money borrowed from a friend or family as well as home credit.
How can I pay off non-essential debts more quickly?
You must make at least the minimum payment on all of your invoices to avoid getting behind on your payments. Divide any excess income into several categories to save money on interest and get out of debt faster.
What Other Options Do You Have for Debt Reduction?
We propose a few more things you may do to properly prioritize your bills, but there are also some things you should avoid. The most essential thing is to put the highest interest-rate commitments first.
First, look at the debt on your monthly statement or loan agreement with the highest interest rate. If you overspend, make sure you won’t be punished or given a late fee.
Pay as much as you can within the confines of your current credit agreements. Pay off your highest-cost debt first, then go on to the next-highest-cost loan.
Things you can do:
- Take action now and begin paying off your debt!
- Make a budget that works for you and talk to a professional who can assist you.
- For assistance, contact non-profit credit counselors, bankruptcy attorneys, and legal aid organizations.
Things you shouldn't do:
- Never overlook your obligation.
- If you have a lot of debt, avoid taking out high-interest or bad credit loans. They may have high-interest rates and so contribute to the debt cycle.
About the Writer
Amanda Girard is the top financial copywriter of AdvanceSOS. She has helped the company grow and expand its reach to customers for the past three years. As a master's degree holder in Finance and a well-seasoned copywriter of more than five years, Amanda writes the most informative articles for us.
