Steps to Eliminating Debt

Steps to Eliminating Debt


1). Credit cards: Borrow in the least expensive and most efficient way – Have you multiple credit cards where you are being charged an interest rate of around 12.9%. Why not look at transferring these onto a new card with a 0% balance-transfer for the first 6 months. Use the money saved to reduce this balance during this incentive period.

2). If your budget allows, pay off the higher interest accounts first - If point 1) is not possible increase the payment on one account at a time until it is paid off. Break your debt into bite-sized chunks. If you can see chunks disappearing this will encourage you as opposed to a large debt dropping slowly.

3). Cut up Credit Cards you don’t need! – Stop using credit cards. This is very important to your financial future. Until you are back on solid financial ground, you need to bite the bullet and quit spending. Especially spending with high interest-charged credit cards! Ask yourself if you need it and if so can you pay the debt off straight away. If not try to avoid it.

4). Beware of Store Cards! - These cards are notorious for higher interest rates than even the rates on a Credit Card. As you pay off department store charge accounts, write a letter to the creditor to close the account, as they are known to keep your account alive.

5). Have a truly Independent Mortgage Specialist review your mortgage – Have you ever checked to see what you are currently paying versus what you could be paying under the advice of a mortgage specialist. An independent mortgage specialist would review all the lenders in the market to reduce your monthly expenditure.

6). Consolidate your debt to the lowest payment - If you are a homeowner look at the possibility of re-mortgaging to consolidate your debts as your mortgage rate will most likely be considerably less than what you are being charged on any existing credit cards and loans. Look at the following example:

A couple have an existing mortgage of £100K, which they are paying their lenders standard variable rate typically 6.5%. They then have a £10K loan which they are paying a rate of 13% on and credit card balances totalling £10K paying 14% on giving total monthly interest payments of £766.66.

If they remortgaged to consolidate all of these debts onto a Tracker rate of 4.64% the new monthly interest payments would now be £464. This gives you a monthly saving on interest payments of nearly £303. This is a huge amount of money and this saving can be used to make overpayments to reduce the debt.

7). Consider using your savings to clear your debt – Harsh as it sounds there is simple logic behind this tip. If you have money in some for of investment or savings and it is earning you 4% interest but have debt that you are being charged 9% on its quite clear that the debt is costing you a lot more than what your savings are earning.

8). Review all of your General Insurances! – Another way to possibly reduce your monthly outgoings is by simply asking an Independent Financial Advisor to look at what your existing cover costs you, (this would include life assurances, buildings and contents insurance etc.) compared to what it would on today’s premiums.

It is not uncommon for people to be able to save themselves hundreds of pounds per year by re-brokering their general insurances. The reason for this is rates can drop but often the company you are with may not check the whole market again each year.

9). Re-analyse your life style and social habits - If you are “keeping up with the Jones's”, STOP! The Jones's will be glad you did, and so will you!

10). Take control of your budget - Whether debt reduction, or meeting goals, you need to keep track of all income and expenses. Update your budget regularly. You should keep on top of spending, and your budgeting, to make sure you don't fall into old habits again. Make sure both you and your partner are both aware of the level of your disposable income. It only takes a few ‘extra’ purchases to start the spiral of debt.

Please see details of a 'Debt Consolidation Plan - How Can we Help?'.

11). Make good use of ‘Spare Cash’ - If you get a tax refund, bonus, or other intermittent income, use this money for immediate debt relief, after you have a cushion set aside for emergencies.

12). Don’t bury your head in the sand! – Lenders listen and there is invariably an answer so talk.

13). Check your situation – Find out the outstanding balances and payment histories of all your debt by contacting the following credit reference agencies who will can provide you with your credit report:

http://www.Checkmyfile.com

You may find that some debt, which you have serviced and paid off, has yet to have been cleared from your credit file so it is always worth checking.

14). Take action. You will feel better the minute you are working toward your goal.