Although everyone has slightly different priorities most people will want to pay debts required to maintain essential shelter and transportation before worrying about other debts.
Sometimes you might find that you cannot even service the debts for even these high priority items. Perhaps your salary isn't enough to pay both your mortgage and the finance on your car.
Some people mistakenly pay their smaller, lower priority debts when they realise they can't maintain the payments on their higher priority debts. They tend to think, "If I can't pay my car finance, at least I can pay my credit cards."
Not a good idea at all. Virtually every strategy to keep your home and your car will mean you have to resume repayments again in the future. If you can't make the payments just now, get in touch with your creditor and see if they will accept partial payments in the meantime.
If you are unsuccessful, save the money. You can use it later to make a lump-sum down payment to get caught up or to cover the costs of moving to a new residence or buying a new car.
Another pitfall to avoid it making desperate choices. Although it is hard to accept that you will lose a home or a car or other valuable property, the alternatives can sometimes be worse.
A really bad thing to do, for example, would be to re-mortgage your home and replace your low interest mortgage with a higher interest mortgage just to give you a few months breathing space.
You have a better chance of working out a solution with the existing lender than you do of avoiding foreclosure by taking out a loan with an aggressive finance company that makes high-rate loans.
There are many strategies for dealing with debt problems discussed throughout this course. Occasionally, though it is best to step back and accept the inevitable change which money problems sometimes require.
Perhaps you can no longer afford to live in the home you are currently in, or maybe you need to sell the car you have now and replace it with a much cheaper one. At this point there are things you can do to make the changes in your life more bearable.
These may include selling the property at a good retail price to avoid a low foreclosure sale price or giving up the property in exchange for a promise that the creditor will not make you pay any deficiency.
These are not easy choices and you really do need to base these on your own unique circumstances and future prospects. After making your decision, it is the best thing to cease payments on that debt and focus instead on servicing other urgent debts.
You absolutely do not want to pay debt on a property that you realise you cannot hold onto at all in the long run. You do not want to throw your hard earned money into a lost cause.
Feelings of moral obligation to particular creditors.
When you are analyzing your priorities you might feel that some creditors deserve repayment more than others. You might like some creditors whilst really loathing others.
You should never let these feelings become a factor in your decision making. Having your family thrown out of their home with nowhere to go just to pay your local dentist and accountants bill is far too much of a sacrifice.
If a creditor is sympathetic or has done you favors in the past, they are more likely to be patient as you work out your financial problems.
A related issue comes up in small communities where there may only be one store or one doctor or one pharmacist with whom you can do business. You may not want to lose your ability to obtain services from that particular creditor and you may feel you have no choice other than to pay that debt first. This may be true, but only in limited situations.
You should not assume that a business or a doctor will cut you off from future service right away if you don't pay. Explain the situation and ask for patience.
Also, you may find there are other creditors nearby who you can use as alternatives should the need arise.
Everyone has financial problems at one time or another. It is nothing to be embarrassed about. Ask for help from creditors with whom you have a good relationship if you need it, and explain that you will make every effort to pay when you get back on your feet. - 16463
Sometimes you might find that you cannot even service the debts for even these high priority items. Perhaps your salary isn't enough to pay both your mortgage and the finance on your car.
Some people mistakenly pay their smaller, lower priority debts when they realise they can't maintain the payments on their higher priority debts. They tend to think, "If I can't pay my car finance, at least I can pay my credit cards."
Not a good idea at all. Virtually every strategy to keep your home and your car will mean you have to resume repayments again in the future. If you can't make the payments just now, get in touch with your creditor and see if they will accept partial payments in the meantime.
If you are unsuccessful, save the money. You can use it later to make a lump-sum down payment to get caught up or to cover the costs of moving to a new residence or buying a new car.
Another pitfall to avoid it making desperate choices. Although it is hard to accept that you will lose a home or a car or other valuable property, the alternatives can sometimes be worse.
A really bad thing to do, for example, would be to re-mortgage your home and replace your low interest mortgage with a higher interest mortgage just to give you a few months breathing space.
You have a better chance of working out a solution with the existing lender than you do of avoiding foreclosure by taking out a loan with an aggressive finance company that makes high-rate loans.
There are many strategies for dealing with debt problems discussed throughout this course. Occasionally, though it is best to step back and accept the inevitable change which money problems sometimes require.
Perhaps you can no longer afford to live in the home you are currently in, or maybe you need to sell the car you have now and replace it with a much cheaper one. At this point there are things you can do to make the changes in your life more bearable.
These may include selling the property at a good retail price to avoid a low foreclosure sale price or giving up the property in exchange for a promise that the creditor will not make you pay any deficiency.
These are not easy choices and you really do need to base these on your own unique circumstances and future prospects. After making your decision, it is the best thing to cease payments on that debt and focus instead on servicing other urgent debts.
You absolutely do not want to pay debt on a property that you realise you cannot hold onto at all in the long run. You do not want to throw your hard earned money into a lost cause.
Feelings of moral obligation to particular creditors.
When you are analyzing your priorities you might feel that some creditors deserve repayment more than others. You might like some creditors whilst really loathing others.
You should never let these feelings become a factor in your decision making. Having your family thrown out of their home with nowhere to go just to pay your local dentist and accountants bill is far too much of a sacrifice.
If a creditor is sympathetic or has done you favors in the past, they are more likely to be patient as you work out your financial problems.
A related issue comes up in small communities where there may only be one store or one doctor or one pharmacist with whom you can do business. You may not want to lose your ability to obtain services from that particular creditor and you may feel you have no choice other than to pay that debt first. This may be true, but only in limited situations.
You should not assume that a business or a doctor will cut you off from future service right away if you don't pay. Explain the situation and ask for patience.
Also, you may find there are other creditors nearby who you can use as alternatives should the need arise.
Everyone has financial problems at one time or another. It is nothing to be embarrassed about. Ask for help from creditors with whom you have a good relationship if you need it, and explain that you will make every effort to pay when you get back on your feet. - 16463
About the Author:
Ian Pelham is a marketer who has come through a very difficult time financially. He used debt consolidation loans to restructure his finances. Using a debt consolidation loan was one of the best things he did to rid himself of his bad debt.
