How To Cut The Costs Of All Your Debts
In order to cut the costs of your debts, the aim is to repay your debts as quickly
as you can while being charged the lowest possible interest rate. The higher the
interest rate your debt is, the more you have to pay back. We all need to have relatively
low, affordable monthly repayments in order to live day to day and because of this
the debt repayment period will have to be longer. This means you are paying interest
for longer too.
But there are ways to cut the costs of your debts and if you are smart about your
finances, you can beat the lenders at there own game and save yourself some cash.
Check Your Credit Reference Score
Before you start on your quest to cut the cost of your debts it is worth checking
that your ability to get new cheap credit is possible by checking your credit score
rating. Many companies on the internet offer this service, often for free (you may
have to sign up – then you can cancel after you have had your check). It is important
to be aware of your credit score rating as erroneous data can cause rejections.
It’s not a good idea to attain a collection of rejections as this can go against
you. Even when your credit rating problem is fixed, you may still continue to be
rejected because of your collection of previous rejections. Get the check first
and fix the problem before you start to apply for credit.
Move Debts To A Cheaper Credit Card
Move your debts from your current card to one that is offering a low rate of interest.
It is possible, if you shop around to get long term borrowing on a credit card at
under 5%. If fact it’s possible to get 0% balance transfers, but beware as some
of these are for a limited period of time, then after that the interest rate will
soar (you could however, move your debt again to another lender with another 0%
interest rate!). Also they could be transfer charges. It’s worth doing your research
using money comparison websites to get the best deal at the time. Also, even if
you don’t have a good credit score rating, you should be able to move your debt
around still.
Shrink Your Credit Card Cost Without New Credit
For borrowers with mid to high credit rating score, it is possible to slash your
credit card cost without getting new credit. New credit isn’t always necessary to
cut the costs of your credit card. There are lots of credit card companies that
allow their existing customers to move other debts to them at special, lower interest
rates.
Personal Loan For Reducing Debt
A standard personal loan can be a consistent cheap debt that is fixed in repayments
so you always know how much is going out every month. Unfortunately those with poor
credit score ratings wont usually be accepted for loan with decent low rates. Always
try to get an unsecured loan as it carries far less risk than a secured loan. With
a secured loan you could lose your house if the debts are not paid.
Using Your Savings to Repay Debts
This may sound like a crazy idea on the face of it but using your savings to repay
your debts is financially viable and one of the best things you can do to save paying
interest. Quite simply, the interest that is paid on savings is usually far less
than the interest charged on borrowing. Thus making paying off your debts with any
savings is a sensible option to consider. You may want to keep an emergency savings
fund available but this no longer a smart option. Read the article on
repaying debts with savings
to understand why.
Paying Minimum Card Repayments – Don't do It
Although temping as it may be to only just pay the minimum repayments on your credit
cards, you are storing up many long term financial issues by doing so. Minimum repayments
will get you hooked in for years, which the banks and lender would love you to do.
Always try to pay as much as possible that you can sensibly pay off.
Remortage Your Home
As a mortgage is in fact just a secured loan against your home, due to its additional
security, it can open the door to cheap rate borrowing. Mortgage interest rates
are usually much lower than personal loan interest rates. However, be aware that
you will probably pay back a lot more as the lending will be over a longer term.