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Credit Education > Debt Management Help > Choosing the debt to Pay-off

Choosing the debt to Pay-off

By Janet Lacey
Published: Monday, December 28th, 2009

Debts can badly damage the credit worthiness rating of any individual. Before borrowing any amount, borrowers should well note the value and weight of the debt that they are about to avail. The value and weight of a debt imply the future possible effects of the debt to the financial stability of the borrower. Qualifying debts will equip borrowers with the sufficient information that they can use in managing debt. Properly accounting the debt agreements that they have entered into will allow the borrowers to know which to pay off first and which are the ones that can wait. Nonetheless, it is always advisable for borrowers to fully pay off all of their debts.

Due to many financial constraints that boomed during the global financial recession, many indebted individuals were forced to change their payments habits. Unfortunately, most of these changes are for the worse.

Many individuals are becoming red flags account holders which means that they are either just paying the minimum required payment or they are paying delinquently and at worst not paying at all. This situation is inevitable these days, but there are ways on how managing debt will not only prescribe full payment. Even if it may sound unbelievable, delaying payments can be a friend of the borrowers who cannot fully pay off their debts. Knowing which to delay is the factor in using this financial strategy.

There are different kinds of debts that many people get to provide their immediate necessities. Some of these debts include loans and installments such as mortgage, auto loan, student loans, credit card, collection accounts, tax debt, and child support. Managing debt skills will definitely be put to test if the borrower would have to bear every one of these kinds. It is almost certain that many people would have to pay at least two of these types of debts. Being unable to do so can damage the borrower’s credit reputation by lowering their credit scores and worsening their reports.

Any kind of debt when paid late is sure to negatively affect the credit worthiness ratings of the credit account holder. It is inevitable, but it can be controlled. Damage control is the only resort that indebted individuals who are unable to pay off their debts on time can use. A borrower can control the damages done by a late payment by accepting the fact that there are late payments that cause more damage to the life of the borrower.

There are late payments that bear more weight in the credit report and score of the individual. Among the examples given, an auto loan is the most demanding one. If an auto loan payment is delayed even just one day, strict companies will already impose fines and sometimes repossess the automobile. Mortgage debts can wait for payment for at most 120 days late. Although mortgage delayed payments can lead to foreclosure and loss of home, some indebted individuals put mortgage at the last of their lists. Credit cards debt can wait for 180 days maximum. Student loans can wait for 270 days. The other type of debts such as collection account, tax debt and child support depend their payment immediacy on the aggressiveness of the collector and amount of the debt.

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