How to prioritise your debts

If you have several debts, you might be feeling overwhelmed. Read more about how to prioritise and work out which debts to pay off first to help you save money and clear your debts faster.

Why it’s important to pay off debts in the right order

The consequences of not paying off some debts before others can be more serious. So if you’re struggling to make your repayments on time, you need to look at all your debts and split them into:

  • debt emergencies
  • priority debts
  • non-priority debts

If you’re facing a debt emergency

If you’re facing an emergency now or in the next few days, such as:

  • court action
  • bailiff action
  • eviction for mortgage or rent arrears
  • disconnection

Get free, independent debt advice urgently. A debt adviser will be able to talk to the court, bailiff or creditor on your behalf. They will also advise you on what to do next.

Always turn up to a court hearing. It gives you the chance to come to an agreement.

If you don’t go, a decision may be made without taking into account information about your situation.

If you are there you can tell the court what’s happening and it might help them to reach a decision that is better for you.

Some courts use advice organisations such as Shelter or Citizens Advice who will be able to give you some last-minute advice on what to do.

If you’re due in court within 24 hours, ask if there is someone you can speak to before your case is heard.

What are priority debts?

Priority debts are those that carry the most serious consequences if you don’t pay them.

These don’t have to be the largest or debts with the most expensive interest rates, but if you don’t pay them it could lead to serious problems.

Priority debts include:

  • mortgage, rent and any loans secured against your home
  • Income Tax, National Insurance and VAT
  • Council Tax
  • gas and electricity bills
  • child maintenance
  • TV Licence
  • hire purchase agreements, if what you’re buying with them is essential
  • court fines

Why you should pay off priority debts first

The consequences of not paying off priority debts could be:

  • losing your home – because you’re not keeping up with mortgage or rent payments
  • receiving a court summons
  • being visited by bailiffs
  • being made bankrupt – because you haven’t paid your tax bills
  • having your heating or lighting cut off – because you haven’t paid your fuel bills

What are non-priority debts?

The consequences of not paying non-priority debts are less serious.

If you don’t pay non-priority debts, your creditor could eventually take you to court or instruct bailiffs to collect money from you.

Your non-priority debts include:

  • credit card, store card debts or payday loans
  • catalogue, home credit or in-store credit debts
  • overdrafts
  • bank or building society loans
  • personal loans
  • money borrowed from friends or family

Water and sewerage bills

Water and sewerage bills are treated as non-priority debts but you should include them as essential household outgoings.

They are an ongoing service that you need to pay for.

If you don’t pay at least your current water and sewerage bills, the amount you owe will continue to go up.

How to pay off non-priority debts faster

You must pay at least the minimum payment on all debts to avoid falling behind.

If you can afford to pay more, share out the extra cash in the following way to save money on interest costs and become debt free quicker.

Target the most expensive debt first

  • Target the debt with the highest interest rate shown on your monthly statement or loan agreement first.
  • Check that you won’t be charged any penalty or default charges for overpaying.
  • Pay as much as you can afford without breaking the terms of other credit agreements you have.
  • Once you’ve cleared your most expensive debt, move on to overpaying on your next most expensive one.

More tips for paying off non-priority debts

There are other things you can do to save money or pay debt off faster.

Get free advice about dealing with debts

“We were so ashamed of our debt problems that we avoided telling people. Trying to live life normally and pretend that everything was ok was very difficult.”

Hayley – who runs the Disease Called Debt website and cleared debts of £41,000.

Don’t struggle with debts – particularly if you’re facing an emergency, such as losing your home or going to court.

If you need more support or don’t know where to start paying off debts you’re not alone. Nearly half of people in debt told us they aren’t sure about the best way to pay off their debts, and that is where a debt adviser can really help you.

“It is a scary thing to pick up the phone and say you have debt problems, but most people feel a huge sense of relief when they do.”

Debt Camelopens in new window – personal finance and debt blogger.

More than eight out of ten people who have got debt advice tell us they feel less stressed or anxious and more in control of their life again.

The people that delay getting advice often find things have spiralled out of control, their cards are maxed out, no-one else will lend to them and it takes much longer to pay back what they owe.

“Debt advice just changed the way I dealt with it. Getting rid of the shame. I am only sorry it took me so long.”

A debt advice client.

You can contact an adviser in a way that’s best for you – online, over the phone or face-to-face.

So join one of the hundreds of thousands of people we help each year and take the first step to being debt free.