Taking into account individual differences, the vast majority of people would prefer to pay the debts required to maintain a roof over their heads and transport needs before seeing to any others.
In some cases, you may find that your financial situation is so bad that your cannot even maintain required payments to those high priority debts. Your income, for example, may not be enough to pay the mortgage and the car loan.
There are those people that make a serious mistake when in this situation. They choose to ignore their high priority debts in favor of their low priority debts, thinking something along the lines of, "If I can't pay my car finance, at least I can pay my credit cards."
This is a bad idea. Almost any long-term plan for saving your home and your car will require that you start making payments again at some point. In the short term, if you don't have enough to make full payments, you can try to negotiate with the creditor to accept partial payments.
If you just can't, put the money to one side and don't use it. It's best used at a later date as a lump sum payment to make up for missed repayments, or buying a cheaper second hand car for cash or to cover the costs of moving house.
Although difficult, really do try to avoid making poor choices. It is hard to face the fact that you may lose your home or your car, but the consequences of poor choices can sometimes be far worse.
An example would be to refinance your low interest rate mortgage with a high interest rate mortgage in order to take the pressure off in the short term (the next few months), although ultimately it will quite likely prove to be hopeless
Most times you stand a much better chance of arranging something with your existing lender than you do with a finance company who gives out high interest rate loans, and might very well be more inclined to foreclose.
There are many strategies for dealing with debt problems discussed throughout this course. Occasionally, though it is best to step back and accept the inevitable change which money problems sometimes require.
Perhaps you can no longer afford to live in the home you are currently in, or maybe you need to sell the car you have now and replace it with a much cheaper one. At this point there are things you can do to make the changes in your life more bearable.
You may need to sell your home at a reasonable retail price so as to avoid a low price at a foreclosure auction, or making an agreement with your lender that they can take over ownership of the property without making you pay any shortfall.
These are not easy choices and you really do need to base these on your own unique circumstances and future prospects. After making your decision, it is the best thing to cease payments on that debt and focus instead on servicing other urgent debts.
You absolutely do not want to pay debt on a property that you realise you cannot hold onto at all in the long run. You do not want to throw your hard earned money into a lost cause.
Feelings of moral obligation to particular creditors.
When you are analyzing your priorities you might feel that some creditors deserve repayment more than others. You might like some creditors whilst really loathing others.
You should never let these feelings become a factor in your decision making. Having your family thrown out of their home with nowhere to go just to pay your local dentist and accountants bill is far too much of a sacrifice.
If a creditor is sympathetic or has done you favors in the past, they are more likely to be patient as you work out your financial problems.
A related issue comes up in small communities where there may only be one store or one doctor or one pharmacist with whom you can do business. You may not want to lose your ability to obtain services from that particular creditor and you may feel you have no choice other than to pay that debt first. This may be true, but only in limited situations.
You should not assume that a business or a doctor will cut you off from future service right away if you don't pay. Explain the situation and ask for patience.
Also, you may find there are other creditors nearby who you can use as alternatives should the need arise.
Everyone has financial problems at one time or another. It is nothing to be embarrassed about. Ask for help from creditors with whom you have a good relationship if you need it, and explain that you will make every effort to pay when you get back on your feet. - 16928
In some cases, you may find that your financial situation is so bad that your cannot even maintain required payments to those high priority debts. Your income, for example, may not be enough to pay the mortgage and the car loan.
There are those people that make a serious mistake when in this situation. They choose to ignore their high priority debts in favor of their low priority debts, thinking something along the lines of, "If I can't pay my car finance, at least I can pay my credit cards."
This is a bad idea. Almost any long-term plan for saving your home and your car will require that you start making payments again at some point. In the short term, if you don't have enough to make full payments, you can try to negotiate with the creditor to accept partial payments.
If you just can't, put the money to one side and don't use it. It's best used at a later date as a lump sum payment to make up for missed repayments, or buying a cheaper second hand car for cash or to cover the costs of moving house.
Although difficult, really do try to avoid making poor choices. It is hard to face the fact that you may lose your home or your car, but the consequences of poor choices can sometimes be far worse.
An example would be to refinance your low interest rate mortgage with a high interest rate mortgage in order to take the pressure off in the short term (the next few months), although ultimately it will quite likely prove to be hopeless
Most times you stand a much better chance of arranging something with your existing lender than you do with a finance company who gives out high interest rate loans, and might very well be more inclined to foreclose.
There are many strategies for dealing with debt problems discussed throughout this course. Occasionally, though it is best to step back and accept the inevitable change which money problems sometimes require.
Perhaps you can no longer afford to live in the home you are currently in, or maybe you need to sell the car you have now and replace it with a much cheaper one. At this point there are things you can do to make the changes in your life more bearable.
You may need to sell your home at a reasonable retail price so as to avoid a low price at a foreclosure auction, or making an agreement with your lender that they can take over ownership of the property without making you pay any shortfall.
These are not easy choices and you really do need to base these on your own unique circumstances and future prospects. After making your decision, it is the best thing to cease payments on that debt and focus instead on servicing other urgent debts.
You absolutely do not want to pay debt on a property that you realise you cannot hold onto at all in the long run. You do not want to throw your hard earned money into a lost cause.
Feelings of moral obligation to particular creditors.
When you are analyzing your priorities you might feel that some creditors deserve repayment more than others. You might like some creditors whilst really loathing others.
You should never let these feelings become a factor in your decision making. Having your family thrown out of their home with nowhere to go just to pay your local dentist and accountants bill is far too much of a sacrifice.
If a creditor is sympathetic or has done you favors in the past, they are more likely to be patient as you work out your financial problems.
A related issue comes up in small communities where there may only be one store or one doctor or one pharmacist with whom you can do business. You may not want to lose your ability to obtain services from that particular creditor and you may feel you have no choice other than to pay that debt first. This may be true, but only in limited situations.
You should not assume that a business or a doctor will cut you off from future service right away if you don't pay. Explain the situation and ask for patience.
Also, you may find there are other creditors nearby who you can use as alternatives should the need arise.
Everyone has financial problems at one time or another. It is nothing to be embarrassed about. Ask for help from creditors with whom you have a good relationship if you need it, and explain that you will make every effort to pay when you get back on your feet. - 16928
About the Author:
Ian Pelham is a marketer who has come through a very difficult time financially. He used debt consolidation loans to restructure his finances. Using a debt consolidation loan was one of the best things he did to rid himself of his bad debt.
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