Debt can easily snowball with overspending and/or a lack of a budget. For those who are struggling with debt and are ready to start taking action to reduce it, however, the first step can be to prioritize all of their debt obligations.
This can help people develop the best plan for starting to aggressively pay off their debt and save the most money possible in the process.
How to Prioritize Your Debts
- List out all of your current monthly debt payments – Be sure to include debts like mortgage and car loan debt, as well as credit card debt, student loan debt, tax debt, medical bill debt and any other debt payments you may be making on a regular basis. To make sure you don’t leave any debt out, it can be helpful to reference bank statements or checking account records as you create this list.
- Figure out the amount you owe for each debt – This will be the first step in determining how much each debt is costing you. As you note the amount owed for each debt, start prioritizing your list according to the debts you owe the most on.
- Figure out the interest rates for each debt – The second part of evaluating how expensive each of your debts is lies in noting the specific interest rate associated with each debt, as well as the term of the debt (if or when applicable). Although credit cards tend to have the highest interest rates, payday loans and even mortgage/vehicle loans can also have substantial interest rates.
- Calculate how much each debt will cost you – Based on the term of the loan (or based on only paying the minimum payments), figure out how much each debt will end up costing you over the life of the loan. Do this by multiplying the interest rate by the principal; then, multiply the product by the term of the loan (to figure out the total interest you will pay over the course of the loan); finally, add the total interest to the principal. That’s how much you will pay on that debt. Do this for each of your outstanding debts to assess how expensive each debt you have is.
- Put your most expensive debts at the top of your payoff list – Now that you have all of the info you need, prioritize your debts in terms of most to least expensive. The focus should be on paying off the most expensive debts first so that you don’t end up paying more than you have to in order to satisfy these obligations.
Contact a Denver Bankruptcy Attorney at Garcia & Gonzales, P.C.
If prioritizing your debt is not enough to help you obtain the debt relief you need, contact an experienced Denver bankruptcy attorney at Garcia & Gonzales, P.C. today for professional, experienced advice regarding your best options for debt relief. With more than 50 years of combined legal experience, our trusted lawyers have the legal knowledge, skills and insight you can rely on to help you favorably resolve your debt issues and obtain a financial fresh start.
To learn more about your best debt relief options, as well as how we can help you, contact us today by calling (303) 839-8888 or by emailing us using the contact form at the top of this page. When you contact us, you will communicate directly with one of our attorneys, not a paralegal or legal assistant. We welcome Spanish-speaking individuals to contact us also – hablamos Español.