Debtors pay personal loan debt first. When debtors do not have enough money to pay all creditors, it is interesting to note that personal loans were paid first.
The hierarchy that debtors pay their debts was found to be as follows:
- Personal Loans
- Auto Loans
- Credit Cards
This order of payment preferences has been consistent since 2004.
Based on a study I reviewed from the Trans Union’s Annual Financial Services Summit, this is counterintuitive. Personal loans are unsecured debt versus secured debt yet debtors pay these first.
The results are clear and it is believed that the duration of time of these loans (usually less than 30 months) is a principal factor in debtor’s decision process.
Debt Repayment Prioritization
- Which bills do you pay first? Is your style the same as the study conclusions?
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