Which Debt Should You Pay Off First?
by April Lewis-Parks
If you have more debt than your budget can handle, you are not alone. Today Americans owe about $47,000 in overall debt, according to the DailyFinance.com. When you owe so much it’s extremely hard to pay off debt while covering your basic necessities, but it’s not impossible. The first step is to recognize that you have financial problems and then design a plan to tackle each debt.
Experts at www.missmoneybee.com will help you decide which debts to pay first:
Pay secured debt: The first debts you should always pay every month are secured debts such as your mortgage because if you fail to make payments, your assets can be taken away. Making monthly payments is crucial to maintain your lifestyle. In addition, you may also wish to include your HOA (homeowners association) payments in this category, as an HOA can also take your home if you fail to pay them each month.
Make payments ordered by court: You should also pay anything that could land you in jail if you don’t pay. Payments ordered by court, such as child support and alimony, are required by law. If the other party makes a complaint and you don’t pay, you can get arrested. If the payments are too high, you need to go back to court and ask for an adjustment—especially if a new job or reduced hours at work has caused a decrease in your income level.
Pay debts that can’t be discharged: You should also pay any debts that cannot be discharged by bankruptcy, such as government-backed student loans. These kinds of debts cannot be discharged, so you may be on the hook for any penalty payments or finance charges you incur for not paying on time.
Pay credit cards: For most people, the only debts remaining after this should be credit card debts. As much as creditors call you, harass you, make you feel bad, send you to collections and even sue you, they cannot take your property or assets without a court order. In addition, as unsecured debts, credit cards have a lot more flexibility in how you pay them off when you need debt relief. Unlike other debts, credit card debts can be consolidated. This is where you combine multiple unsecured debts into a single, low monthly payment at a much lower interest rate. The right consolidation option in the right circumstances can reduce your monthly credit card payments by as much as 50 percent.