If you feel as though you are losing your grip on debt, it is vitally important that you know the two types of debt you need to understand. This could put you back in control of your debts or help you understand how you should deal with these debts moving forward.
The two types of debt that you need to understand the differences between are:
1: Non-Priority Debts
2: Priority Debts
Why Should I Know the Difference Between These Two Types of Debt?
Both Priority and Non-Priority Debts are two completely difference types of debt and if you are struggling to meet your debt repayments it is vital you understand the differences and the potential consequences of missing repayments.
Non-Priority Debts: These type of debts include credit cards, store cards, overdrafts and unsecured loans.
Priority Debts: These type of debts include mortgages, secured loans, tax and utility bill debts.
Just because a debt is ‘non-priority’ does not mean that you can go without paying it, but the consequences of doing so are generally less severe than missing priority debt payments.
Always ensure that your budget allows you to make the required payments to your priority debt. Failing to do so can lead to serious consequences. For example, missing mortgage payments can lead your mortgage lender to start the process of repossession against you and you could lose your home.
How Can I Afford my Non-Priority Debts?
If you are worried about your ability to repay your debts then it makes sense that you would look for a way to make those debts more affordable to you, and a Debt Management Plan can do just that.
The amount that you need to make to your non-priority debts, through a debt management plan, is tailored to your individual circumstances. This means that you should be able to afford your priority debts as this will have been accounted for.
For more information about the two types of debt, and if you are unsecured if your debt is a priority or non-priority debt, please get in touch. Our One Advice team are on hand to offer you debt advice and can help you to deal with your non-priority debts by making them affordable which will, in turn, make your priority debts much more manageable.