QUESTION: How to properly prioritize debts with different interest rates and penalties?

Competent debt prioritization in the presence of different interest rates and penalty sanctions is the key to a successful and least costly way out of the debt trap. The situation when a person has accumulated several credits, loans, and credit cards requires compiling a clear register indicating the remaining debt, interest rate, and current status of each obligation.

First of all, it is necessary to close all current overdue payments and pay off debts for which large fines and penalties are already being accrued. Overdue obligations cause the greatest damage to your credit history and entail aggressive actions from banks or collectors, so their liquidation has absolute priority.

After eliminating overdue payments, a queue of the remaining loans is formed based on their cost to your budget. First, you should direct maximum efforts to close the most expensive debts by interest rate — as a rule, these are microloans and unsecured consumer loans.

At the same time, at least the minimum monthly payment must be made for all other credit obligations without fail. This helps avoid new fines, damage to credit history, and legal proceedings while the main financial resources are directed at eliminating the most expensive debt in your portfolio.