Often in life you can find yourself in a bit of a pickle when it comes to money. Maybe some unexpected bills came up that you were not prepared for. Perhaps you needed to buy a car to get to work. Whatever the reason, it happens, and there are a few things you can do to help get yourself into a better situation fast!
1. Focus on the highest interest rate first
If you have multiple debts, say a credit card, a hire purchase and an overdraft, it is important to pay these off in the correct order so that you can get out of debt fast and save the most money.
So the first thing to do is find out what the interest rates are on each of your debts. Often credit cards or payday loans are going to be the one with the highest rate.
Now you have figured out the highest rate debt, you need to pay off as much as you can each month rather than just the minimum payment. The reason for this, is everyday interest is calculated on your debt, so the lower the amount of debt on each day, the less interest you will be charged.
In the long run, this means you end up paying the debt off faster and also it costs you less because you are paying less interest.
2. Credit Card balance transfers
Did you know that different credit card providers offer an interest free period when you transfer the balance of a credit card from another bank to them?
Often the big banks have a 6 month or even a 12 month interest free period when you transfer the balance. That means on a credit card debt of $5000 at an interest rate of 19.95% you would save nearly $500 over a 6 month interest free period.
Now of course this only helps you if once you transfer the balance, you pay off as much as you can each month. Don’t just pay the minimum amount. This is to drop the balance as much as possible while in the interest free period.
If you get to the end of the interest free period and still owe money, nothing is stopping you from doing another balance transfer to a different bank to take advantage of another interest free period.
3. Consolidate Debt into a single repayment
Another option is to get a ‘Debt Consolidation’ loan, which brings all your debts together into a single, easy to manage repayment.
Often this winds up to be the most manageable solution for someone with many debts, as it makes the monthly repayment much smaller and can often be at a lower average interest rate.