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Priority Debts: How to Manage your Debts

Man writing 'get out of debt'

How to pay off debt fast?


Debt can be overwhelming, particularly when you are endlessly trying to eliminate fees and your efforts don’t seem to be paying off (literally). At this point, many people want to know how to pay off debt fast. Yet, it is actually more important to prioritise your debts rather than attempting to pay everything in one go.


Certain debts can incur serious consequences, such as prison time or repossession. The Money Charity estimated that 18 properties are repossessed everyday throughout the UK. With that in mind, separating your priority vs non priority debts is the first step towards a debt-free life.

A pile of envelopes with priority debts

Photo Credit: [Corund/Shutterstock]

What are priority debts?


So, what are priority debts? Well, they are the debts which produce the most significant repercussions if left unpaid. Your secured debts are essential because you have an collateral at stake. If you don’t pay, the lenders can take your assets. For example, you could lose your car if you are struggling to pay off debts.


Priority debts also include many of your utilities. If you fail to pay the electricity bill, you could face disconnection. The severity of unpaid childcare debts will vary from bailiffs seizing your personal belongings to forcing the sale of your home. At worst, you could be sent to jail.


The following categories are considered priority debts:


  • Utilities: electricity and gas
  • Shelter: mortgage payments and rent
  • Court orders:
  • Tax: Income tax, VAT and national insurance
  • Secured loans: car payments
  • TV licence
  • Child support


What are non-priority debts?



Credit cards are non-priority debts

Photo Credit: [Olleg/Shutterstock][/caption]


Non-priority debts are less critical. Whilst you may incur interest on these bills or be sued, lenders have less authority. Usually, you will have more time to resolve the issue before any severe penalty is implemented. Non-priority loans are still important. Yet, they should always be paid after your priority debts.


Of course, subscriptions should be the least of your worries. Often overdue payments will result in the suspension of your account. For example, if you don’t pay for your Netflix account, you will no longer be able to use their services. However, this subscription is not a necessity when under financial strain.


So what are non-priority debts?


Here are some s examples of non-priority debts:


  • Credit card debts
  • Water bills
  • Hire purchase agreements
  • Unsecured bank and payday loans
  • Loans from friends/family
  • Catalog and doorstep loans
  • Subscriptions: Netflix, Spotify etc.


What to do if you are still struggling to pay debt 

couple struggling to pay off debts

Photo Credit: [WAYHOMEstudio/Shutterstock]


Follow this five-step process if you are struggling to pay off debts:

  1. After narrowing down your bills into priority vs non-priority lists, you should draft a budget. We appreciate it is difficult to make a budget when your bills outweigh your income. However, it is vital to write down your current financial situation. Being in the know-how will enable you cut costs and address arrears.


  1. Once you have made a budget, you need to contact your creditors to explain your financial situation. The worst thing to do is ignore an issue. If you are struggling to pay off debts, you can ask for interest to be frozen or negotiate a feasible payment plan.


  1. If you are wrestling to keep up with your mortgage payments, voluntary repossession should be your last resort. There are ways to avoid repossession. As such, it is important to seek out advice immediately. For example, you could increase your mortgage term or opt for a mortgage holiday term to put your payments on hold. Contact us to discuss your situation and prevent repossession.


  1. Next, you can implement a debt management plan (DPM). This will ease the burden of your non-priority debts so that you can pay off your priority debts first. For example, a DPM could be used for your credit cards or bank loans. If you owe money to friends and family, it is important to keep them informed of your situation. There are simple ways to make budget cuts, such as reducing your energy bill.


  1. Finally, seek out support. As they say, ‘a problem shared is a problem halved.’ Choosing an accountability partner, perhaps a friend or relative, is a great way to stick to your budget and find support. Many people suffer with anxiety as a result of their financial strain. If you are facing mental health difficulties, contact your local GP as the NHS can offer free support.


The most important way to overcome debt is to initially acknowledge the issue. The fact that you are even reading this post and seeking financial education, indicates that you are on the right path to becoming debt free. Even celebrities have bounced back after severe debt.


For example, in the late 1980’s Will Smith owed 2.8 million dollars to the IRS. Perhaps this was his rock bottom moment? Yet, he did something about it. Will picked himself up, with the support of his girlfriend at the time, and later became debt-free. If he can do it, you can too.



Feature Image Photo Credit: [ESBProfessional/Shutterstock]

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