We cannot control the circumstances around us and in which we live all the time. And sometimes it happens that the domestic economy is one of those circumstances. Sometimes we see ourselves in haste that forces us to set priorities: What debts to pay first? Between the monthly payments of the car, the cable service, the mortgage credit, the credit card … What should we pay before to get out of the trance?
How to determine which debts to pay first?
Two qualities are essential to prioritize debts: rigor and discipline . Only in that way will you avoid the worst thing that can happen to you if you have economic urges: pay surcharges, fines or interest .
To know which debts to pay first, you must.
- Make a list of all your debts and recurring expenses (from the payment of the mortgage loan to the monthly payment of the cell phone)
- Sort them according to the type of interest they pay : from the highest to the lowest
- Prioritize the payment of those debts that imply a higher interest rate, and leave for later those that pay less. This way you will lose less money for interest.
- In the case of debts with less interest, if possible make the minimum payment that allows you to avoid late payments and surcharges.
What is the disadvantage of this payment method?
When choosing which debts to pay first and contribute for the payment of those with a greater interest, you may have the feeling that you do not advance in the payment of your debts , since some of greater amount but of less interest will accumulate.
For example: if you have a fast credit for 10,000 pesos with a 20% interest , and you also have the credit of a car for 100,000 pesos with a 2% interest . The sentimental logic will make you believe that you must pay the car before , because it is a greater amount, but if you do so, and then leave the credit of less value but with greater credit, that debt will grow uncontrollably.
Always choose that debt on which your money is worth less ; that is to say: to have more interest. Of course: never stop paying your mortgage credit because in this case at a higher interest adds the possibility of losing your home.