The citizens of the United States of America are working really hard to fight their present debts. According to the Federal Reserve Bank of New York, the overall burden is plummeting with a debt reduction of around $100 billion in less than a year. This, without a doubt, is a positive sign. However, it should be noted that your responsibility does not end with the cutting down of debts. You should be able to manage your remaining debts in a proper fashion. Your debt prioritization should include calculative measures such as:
- Making your repayments on a timely manner
- Targeting your higher rate debts first
- Avoiding unnecessary expenditures as much as possible
However, borrowers are often confused about which loans to pay back first. This acts as a stumbling block in the way of getting rid of these debts. But fret not! Here are some effective ways to prioritize your debts or paying off your loans in a smarter way.
How can you prioritize your debts?
The loans (handled by you at present) which are to be paid first are called “priority debts.” These loans are not necessarily the ones that carry high rates of interest. Think what you’re going to lose if you don’t pay up the loan. If you are not keeping at par with your mortgage loans then you’re likely to lose your home. If you haven’t paid your fuel bills you might as well find your electric connections cut off. Non-payment of some debts might even result in court summons as well
Here’s how you should arrange your payments
- Mortgage or any debt obtained against your home
- Council tax
- National Insurance, Income Tax
- Child maintenance
- Electricity bills
- Council tax
- Court fines (if any)
You might as well opt for a reliable debt consolidation service in a bid to bring all your debts under one umbrella debt. The rate of interest applicable on the remaining debt would be less than that what you were paying before. It not only aids you to secure a lower rate of interest but also lets you track your loans in an easier fashion. But, exercise due to prudence in consulting the top ten reviews of the debt consolidation service providers before settling for one of them.
One of the most effective solutions in this regard would be to turn to a financial advisor as you find that you have been consistently unable to pay your debts off. Don’t wait until you lose your home or are compelled to declare yourself bankrupt.
Make sure that you’re adopting a methodic approach towards your financial responsibility. Even if you are turning to professional debt relief or consolidation services, you yourself should sit down with all your statements, receipts, and dues in order to calculate how much you’ve paid and how much you owe. Consider the rates of interest and late fees on each of your debts. This will help you estimate whether you are paying a lower rate of interest after opting for consolidation or not. Additionally, you would be able to get an idea of if you would be able to repay them or not.