Prioritizing Debt
Chances are, if you're in trouble with debts you are finding it hard keeping on top of the payments for all your debts. Only some expenses can be reduced and your income can be stretched only so far.
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.
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.
The most important creditor to pay is not necessarily the creditor who screams the loudest or the most often. Creditors who yell the loudest often do so only because they have no better way to get their money.
Of more concern are creditors who not only threaten, but actually can take quick action against your home, utility service, your car, or other important assets.
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.
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.
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 physical property that a creditor has the right to seize should you default on your payments to them. Usually collateral takes the form of your home (mortgage) and your car when you take out a car loan.
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.
The notion that 'secured debts' are the ones most vital to pay is a fairly simple one. The problem arises when you have a constant stream of debt collectors harassing you to pay unsecured debt, often distracting you from keeping the 'secured debt first' rule in mind.
It is extremely important to remember this concept as you make decisions about your financial future. - 16036
Chances are, if you're in trouble with debts you are finding it hard keeping on top of the payments for all your debts. Only some expenses can be reduced and your income can be stretched only so far.
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.
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.
The most important creditor to pay is not necessarily the creditor who screams the loudest or the most often. Creditors who yell the loudest often do so only because they have no better way to get their money.
Of more concern are creditors who not only threaten, but actually can take quick action against your home, utility service, your car, or other important assets.
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.
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.
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 physical property that a creditor has the right to seize should you default on your payments to them. Usually collateral takes the form of your home (mortgage) and your car when you take out a car loan.
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.
The notion that 'secured debts' are the ones most vital to pay is a fairly simple one. The problem arises when you have a constant stream of debt collectors harassing you to pay unsecured debt, often distracting you from keeping the 'secured debt first' rule in mind.
It is extremely important to remember this concept as you make decisions about your financial future. - 16036
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.
