Most of us have debt in some form; that is a fact of life. It is important to have a goal to pay back any debt owed, but it is just as important to know which debts should be paid off first. It is no good paying off other debts if it means letting your home or rent repayments lapse. Facing eviction from your accommodation should never be an option. If your debt has spiralled out of control, it is a bad habit to just ignore it. Massive accumulated debt can cause people to panic and this leads them to not think about it. This way of thinking will get you absolutely nowhere. The consequences of ignoring large amounts of accrued debt will only get you into deeper debt.
Communicate with creditors
If you talk to your creditors straightaway, before you struggle with financial difficulty, you will be surprised at how willing your creditors will be to work out a payment plan. Accumulated debts and approaching creditors can be an emotionally stressful time but once you make the first move, you will begin to gain control of your financial situation.
Seek financial advice
There is no need to try and work out your debt by yourself. Make an appointment with your mortgage lender who you will find very approachable. They can offer you advice on consolidating debts to get you out of a tough situation. This is one way to make repayment of all your debts manageable.
Prioritise debts to pay off first
Never put yourself in the position where you could lose your home. Always pay your tax bills otherwise you could be declared bankrupt. Have a plan in place to pay utilities such as electricity and water. The important debts to pay off are mortgage or rent, income tax, any fines and essential services.
Your mortgage lender will be able to help you with a payment plan. You could be advised to change the way you pay your mortgage. If you do not try to resolve your debt, court action can be taken against you.
What is a non-priority debt
Other debts you may have are store cards, personal loans, overdrafts or money owed to family or friends. Don’t think that these debts are not important. Try to repay the maximum amount you can on cards with the highest interest rate. This way you can repay your debt faster. Work out a pay plan for family and talk to your lender about way to manage personal loans.
All debts should be given priority. However, all debts should also be placed in order of priority. Do not be afraid to approach your main lender or bank to try and get your debts in order. It is critical that your mortgage be attended to first. If you are honest with your bank, they will be happy to give you advice on other options available to you. A Clear Path Home Loan from BOQ may help to get you out of a tight spot. This loan has a low rate of interest and flexible repayments which can come in handy when you’re walking a financial tight-rope.