Borrowing or resorting to debt may be one of the financial solutions that help people obtain sufficient financial liquidity to achieve their financial goals or face temporary financial pressures.
The burden of this debt may increase in the case of multiple borrowing sources, i.e. the customer obtaining more than one financing product in addition to using the credit card balance or other costly borrowing methods, and he was unable to regulate the payment of the due amounts.
Therefore, he must develop a good plan that determines the priority of repayment to ensure that any of the repayment payments are not forgotten or delayed in the due date, in addition to reducing the cost of that debt as much as possible.
4 steps to help you prioritize debt repayment
1-Determine the size of the debt
When developing a debt payment plan, the goal should be to get rid of the total debt owed, so determine the size and sources of debt, such as credit card debt, monthly financing installments, personal advances, etc., and then
The classification of those debts in terms of their size and the financial burden imposed on the monthly salary.
[ What is the penalty for defaulting on loans? ]
2-Arrange the debt by cost
Prepare a list of outstanding debts that are organized according to cost, starting with the highest cost and ending with the lowest cost. For example, the cost of the amounts due on credit cards is usually higher than other financing programs, such as personal or real estate financing, while the cost of personal finance may be higher than real estate financing.
3-A reminder of the due dates
It is always preferable to set a schedule or a reminder of the dates of payment of installments to avoid any delay penalties or any additional charges. In this regard, the Corporation has obligated funding agencies to determine the deduction date to be compatible with the date of depositing the monthly salary and that is specified in the payment schedule or agreed upon later with the customer through one of the documented means of communication, and a commitment to deduct the monthly installment on the agreed deduction date. As for the credit card, the card issuer must send a monthly account statement at least three weeks before the due date.
4-Determine the minimum payment
If it is impossible to comply with the payment of all amounts due to an emergency or because of the necessary spending increase in some months of the year, then looking at the payment of the minimum amount may be a temporary solution.
For example, paying the minimum amount on credit cards may be better than not paying at all, as this keeps the credit report free from any default. It also avoids the person paying fees in the event of default on the specified date. However, it should be noted that this will not exempt him from paying the fees ( the annual percentage rate ) applied to the remaining amount due. The main goal of this step is to avoid getting stuck.
Thus, we see how important it is to be familiar with all the details of debts before obtaining them and to ensure their compatibility with the monthly salary to ensure that there is no default or increase the financial pressure on the monthly budget.
It also helps you to prioritize repayment, without knowing the size of each debt, the cost, and the due date, it will not be worth paying in an indiscriminate and ill-considered manner.