What do you do if your income diminishes? You have less money, but the amount of debt you owe remains the same. What’s the best way to prioritize payments? If you have credit cards chances are you might also have personal loans and a mortgage.
Throughout the past few years, more consumers in a bind due to decreasing income have decided that credit cards should be higher than their mortgage payments on the prioritization list. As 2009 ended it was determined that twice as many consumers were delinquent with their mortgage payments while paying credit card payments than the other way around.
Even though some of this might be a result of the credit crunch and lower balances on cards generally, this might be due to the general tendency for people to lose faith in the value of their homes as they see the real estate market erode. A lot of homeowners are giving up and simply walking away from their homes with mortgages that they cannot afford. They figure that if the only punishment is a bad credit score, there isn’t much incentive for them to keep paying money if they are not building equity.
For families suffering from financial trouble, the basic necessities are still needed: food, water and shelter. Credit cards are the usual financing tactic in times of need. There is an understandable set of reasoning for prioritizing these bills. If a credit card is taken away, someone will lose the chance to pay for the bare necessities.
However, a mortgage should be higher on the priority list than credit cards because the mortgage is secured debt. The bank that holds your mortgage can take your house away if you don’t pay because your house is collateral. While some people have no problem leaving a house whose value has diminshed, it’s not considered a very wise choice. There is a good chance real estate value eventually will come around, so sitting tight might pay off.
Mallory McGuinness is employed by a debt collection agency. Also, she composes pieces on the credit industry, business and finance, and debt collection Get a totally unique version of this article from our article submission service
