What prioritising debt can do for your finances

When debt repayments start to mount up, it's easy to be overwhelmed and simply repay the most persistent requests for repayment. Though if you take the time to prioritise your debts you'll find it much easier to protect the most important things in your life, and to take control of your finances for the future.



Priority debts

Identifying priority debts isn't about finding the biggest sum you owe, or even the ones due soonest. It's those with most at stake:

  • Mortgage/rent and loans secured against your home, as non-payment can result in the loss of your home.
  • Gas, electricity and water bills. Neglect these and your provider may cut them off.
  • Taxes (including Council Tax), National Insurance, child maintenance, court fines and your TV licence. Non-payment can result in a court summons or worse, a declaration of bankruptcy. These ruin your credit history, meaning only the most expensive credit will be available to you in the future
  • Hire purchase agreements. Anything you've bought with such agreements can be reclaimed if you miss payments, meaning you lose everything you've paid so far.

If you're struggling with these payments, contact your creditor immediately. If they can't help, contact a debt advice charity like National Debtline or Step Change.

Non-priority debts

Unsecured bank loans, overdrafts, credit cards, store credit and money borrowed from friends or family are all 'non-priority' debts. With these, your aim is to start cutting these down as quickly and efficiently as possible. Here's how:

Avoid interest. Identify bills with a minimum payment. Hit that every month to avoid added interest on the amount you owe.

Avoid penalty charges. Some debts, particularly overdrafts, have penalty charges for missed payments or spending over agreed limits. Ignoring them quickly becomes costly.

Hit the high rates. Find the bills with the highest interest rate (expressed as percentage APR) and start overpaying to reduce your overall interest.

Use your savings. Spending your nest egg can help in the long run. The money you save on debt interest is nearly always more than what your bank pays out.

If you want help organising a payment plan you can afford, contact a Dukes Bailiffs advisor today.