I will be honest with you. I have hardly come across anyone over 18 who did not have at least one credit product. But in previous years, just before the credit crunch we were offered different deals with irresistible conditions, and credit companies were competing for customers. Now they don’t they got us into trouble and just want their money back.
If you have more than on credit products and you feel like you are trying to juggle too many plates at the same time without success, you just simply need to eliminate the ones that are the hardest to manage first. And this is what is causing a lot of problems for many customers.
The reason is simple: we have too much credit, too many products wit different interest rates, terms and conditions, charges, repayment dates that it is hard to keep all them in our head. That’s when debt evaluation comes in and using this technique you will be able to determine how to prioritize
your debt payments.
The first two very important payments you cannot miss are below:
Secured loans and mortgages
We need to pay this and it should be our very first priority. If you do not pay a home loan or mortgage, you can lose your home, and that’s it. So the very first thing you should think of when you are budgeting on paying off your debt is your home loans.
Car loans
Let’s face it: if we have no car, it is hard to get into work, do the shopping in the supermarket, get the children to school, so it is actually a part of our life. So you should make sure that you are paying your car finance, and give it a high priority.
Further prioritization guidelines:
1. Interest rate
You should be paying the debt that has the highest interest rate first. The reason for this is that if you are late with the payment you will get charged extra interest and therefore it will cost you more.
2. Charges
We also have to have a look at the terms and conditions to see which company charges us the most if we are late with the payment. There is no point putting off a payment of 20 dollars for a day while it costs us about the same amount in charges.
3. Balance
It is also important that you prioritize the rest of your debt by balance, as the higher the balance is the more likely the company is going to start legal proceedings against you if you keep on missing your credit repayments.
In the ideal world you would be making every single credit payment on time. But this is not always the case, and there might come times and unexpected circumstances when this is just impossible. Make sure that you prioritize your debt payments the way that you:
a, incur the least charges or interest
b, are not endangering your lifestyle
c, are not damaging your credit rating.