Prioritizing Debt
It is quite likely that if you are experiencing debt problems then you are finding it increasingly difficult to keep up with your monthly debt repayments. Your income can only go so far and only some of your expenses can be reduced.
This leaves you with no choice but to delay or not pay some debts. Once you determine that you can't afford to pay all of your debts as they come due, you will have to make some hard choices as to which bills you should pay first. Your home or apartment, your utilities, your car, and even your household possessions may be at risk.
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.
The main thing to do with too much debt is to decide which debts should be paid first, which you can refuse to pay, and which you can delay for a period of time.
The creditor who makes the most noise most often is not necessarily the creditor you should pay back the first. Many times these creditors make as much noise as possible to intimidate you since they have no other way to reclaim their money.
More worrying are those creditors who make some noise but then very quickly take action to recover their money in the form of legal action to take away your home, car, gas, electricity, etc.
Pay off creditors who can take the quickest action to hurt you, not those who yell the loudest and call the most often.
Your available resources should be used for the things most needed for your family - usually food, clothing, home and gas & electricity.
It would be great if there was a recommended 'list' dictating the order in which your debts should be paid, but unfortunately there isn't. Your situation will be different to someone else's. The guidelines in this article should be used as reference points only as you make your decisions.
Debts with collateral are top priorities.
The most important concept to bear in mind throughout this process is one of 'collateral'. This concept should guide you when deciding which debts to pay and which to default on.
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'.
In nearly every case you should pay secured debts first. 'Secured creditors' are creditors who have collateral. They know that if you don't pay them back they can take the collateral from you and auction it off to try and recover 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.
This concept of paying your debts that are secured first is a simple one, but when you have debt collectors constantly hounding you to pay the lowest priority debts first it can be very difficult to keep it in mind.
It is extremely important to remember this concept as you make decisions about your financial future. - 16928
It is quite likely that if you are experiencing debt problems then you are finding it increasingly difficult to keep up with your monthly debt repayments. Your income can only go so far and only some of your expenses can be reduced.
This leaves you with no choice but to delay or not pay some debts. Once you determine that you can't afford to pay all of your debts as they come due, you will have to make some hard choices as to which bills you should pay first. Your home or apartment, your utilities, your car, and even your household possessions may be at risk.
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.
The main thing to do with too much debt is to decide which debts should be paid first, which you can refuse to pay, and which you can delay for a period of time.
The creditor who makes the most noise most often is not necessarily the creditor you should pay back the first. Many times these creditors make as much noise as possible to intimidate you since they have no other way to reclaim their money.
More worrying are those creditors who make some noise but then very quickly take action to recover their money in the form of legal action to take away your home, car, gas, electricity, etc.
Pay off creditors who can take the quickest action to hurt you, not those who yell the loudest and call the most often.
Your available resources should be used for the things most needed for your family - usually food, clothing, home and gas & electricity.
It would be great if there was a recommended 'list' dictating the order in which your debts should be paid, but unfortunately there isn't. Your situation will be different to someone else's. The guidelines in this article should be used as reference points only as you make your decisions.
Debts with collateral are top priorities.
The most important concept to bear in mind throughout this process is one of 'collateral'. This concept should guide you when deciding which debts to pay and which to default on.
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'.
In nearly every case you should pay secured debts first. 'Secured creditors' are creditors who have collateral. They know that if you don't pay them back they can take the collateral from you and auction it off to try and recover 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.
This concept of paying your debts that are secured first is a simple one, but when you have debt collectors constantly hounding you to pay the lowest priority debts first it can be very difficult to keep it in mind.
It is extremely important to remember this concept as you make decisions about your financial future. - 16928
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.
No comments:
Post a Comment