The average debt per household in the UK is estimated to be over £30k. While this amount may seem quite staggering, more often than not, this is a combination of lots of different debts that you might have found yourself owing.

When it comes down to it, though, which debt do you pay off first? We have a look at the decision you should think about when you’re paying off debt, and we’ll go through some of the more frequently-asked questions about which debt to pay off first.

Priority debts & Non-priority debts

There are lots of things that you might need to pay for each month, and it can get a little confusing about which ones you need to pay for first. One way of working out which debt to pay off first is considering whether it is a priority debt or a non-priority debt.

Some bills are classed as priorities because if you don’t pay them, the consequences and the problems that might arise are much greater. A prime example of a debt you should pay before any others is your housing rent. If you don’t pay your rent, you could end up losing your home. 

Which debt to pay off first? A list

So which debt to pay off first? This will largely depend on what debts you owe. If you owe lots of unsecured debt, then it might not matter which debt you pay off first, but if you have secured debt, you’ll want to make sure that they’re paid for as soon as possible.

Below, we go through all the debt that you might incur that qualifies as priority debt. From this list you’ll be able to work out which debt to pay off first.

Mortgage

If you’ve missed your mortgage payment, these will be recorded on your credit file. If you don’t pay what you owe, you’ll be at a real risk of having your home repossessed. This is definitely one of the debts to pay off first as you risk being left without a home.

Secured loan

Secured loans are loans that are taken out with a physical item against them as collateral. Mortgages are an example of a secured loans, but so are vehicle loans. Basically, a secured loan means that you could lose something significant like your car or your home. 

Rent

Similar to a secured loan, this is one that you need to pay off first if you don’t want to be evicted. If you owe your landlord money for your rent, and you are considering which debt to pay off first, you should settle your rent as you may end up without a home.

Council tax

There could be serious consequences if you don’t pay your council tax debt, including the council sending bailiffs to your home, money being taken automatically from your wage, benefits being lowered or having money taken out of them, debt being secured against your home, bankruptcy and even prison. 

Child maintenance

Child maintenance, or child support, is money used to help your child with clothing and food, as well as other costs. If you’re wondering which debt to pay first, child maintenance is high up on the list. If you don’t pay it, you could have money taken from your wage, money taken out of your benefits payments, visits from a bailiff and even imprisonment.

Magistrates or court debt

Court-ordered fines or debt are really important to settle. If you don’t you could face a visit from the bailiffs, there could be money taken from your wage, money taken out of your benefits, or a prison sentence. Another court hearing will also probably be required of you. 

National Insurance/VAT

Another priority debt that has quite serious consequences if you don’t settle up and let your account fall further into arrears. You might face a visit from the bailiffs, there could be money taken from your wage, enforced bankruptcy and a County Court Judgment (CCJ) could be taken against you if you fail to settle up on your National Insurance.

TV licence

One of the biggest and most prominent debts there is, TV licence debts can be a real headache. If you use any sort of TV service, and you either don’t have a TV licence or you have fallen behind on your payments, then you could end up receiving a court fine. 

Gas or electricity

Utilities such as gas and electricity also fall under debts that are a priority to settle. Water debts have a slightly different procedure for them, but gas and electric debts that remain unpaid could end up with you being disconnected from whichever one you owe, or having money taken off your benefits to settle these debts.

Logbook loan

Logbook loan debt is the result of borrowing money using your vehicle as security, in that you hand over ownership of the vehicle to the logbook loan company until the loan has been paid back. You could end up having your vehicle repossessed or having a County Court Judgment taken out against you if you fail to repay the loan.

Hire purchase

Hire purchase debt is a type of finance agreement that is used to buy motor vehicles and things like furniture or other appliances. Hire purchase basically means that you don’t own the goods until the last payment has been made, and the creditor can take the goods back if you miss your payments. You could also end up with a County Court Judgment taken out against you if you fail to make your payments towards your hire purchase as well.

Telephone

Landline connections and mobile agreements are both important debts to keep near the top of your list when considering which debt to pay off first. If you don’t settle up your debt, you could face disconnection or have your service provider apply for a County Court Judgment against you.

FAQs

That’s a list of the debts that are known as priority debts, and the ones you should absolutely consider if you don’t know which debt to pay off first. Here, we’ll answer some of the frequently-asked questions about debt collection and which debts to pay off first.

What happens if I don’t pay my creditor?

We’ve outlined the various different consequences that you might face if you don’t pay these priority debts, but the severity varies from paying a fine through to imprisonment.

What happens if I can’t pay them? 

If you can’t pay your creditor, you should get in touch with them as soon as you can and explain your situation. If you’re still struggling financially, you can reach out to one of the many charities and services in the UK that assist those in difficulty. These are some of the best established:

Can I make a complaint?

If you have any complaints about your creditor or the debt collection agency who are dealing with your debt, you should get in touch with them directly. If they don’t respond, you can escalate your issue to the Financial Ombudsman Service who will take matters into their own hands.

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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