Priority in Debt Payment

If you have some kind of debt, mortgages, unsecured loans, credit cards and loans. Which debt should be prioritized to be paid? Mistakes in choosing the debt to be paid can be a costly decision, you could end up in a worse situation than when you start to owe. Here are the guides in prioritizing your debt.

Pay your mortgage first
Mortgage payment is at the top of your priority debts. That includes second mortgages, home equity loans, because it's all tied to your home. If you have a default on mortgage payments, the bank that owns the rights to your house will auction it off to the highest bidder. If the bank sells your house worth less than the amount you owe, the bank can still charge you for this underpayment.

Property insurance
Property insurance is not always necessary as the debt, but it is important for you to pay, the insurance company will cancel the policy if you do not make payments. If this happens, the lender will buy insurance for you and add the premium into your mortgage payment.

Debt with collateral
Payment of a car loan is almost as important as the mortgage payments for the same reason. Car loan related to your car, the asset you use to leave and come home from work. If you have a default on a car loan payment, the lender can take back your car, auction it off and then send the bill for the shortfall debt.

Health Bills
Pay your medical bills, especially if you need to continue to use medical facilities. The hospital will probably try to get you to pay the debt. They can also send your bill to a collection agency or even sue you for unpaid debts.

Unsecured Debt
Prioritize your credit card debt and other unsecured debts ranging from the highest interest rate to the lowest interest rate. If you fail to pay your credit card debt, the credit card company will try to make you pay the debt. Then, after that, they will contact the debt collector. Finally, the card issuer can sue you and ask the court for permission to take one of your valuable assets or cut for your salary.

Consider the list above, the credit card companies are on the last list. Although you do not always want to face one of them in court, you have a lot of losses if you late to pay your debts.



[image taken from: schultzlegalgroup.com]

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