03 Feb | Different Options for Becoming Debt-Free This Year
Credit card, store cards, loans – these days there are all sorts of ways to borrow money. Whilst this is all well and good for those who are able to borrow responsibly, with the ability to manage debt general reflecting well on a borrower’s credit rating, what happens if you find yourself racking up too many debts in one go? In these cases, the best option is to figure out a plan to make those all-important repayments until you are living the debt-free life that we all crave.
If you are interested in tidying up your finances now the New Year has turned, we have put together a few ideas on how to get yourself back “in the black”…
Debt consolidation loans
A debt consolidation loan is designed to allow you to owe money to one single lender, rather than having the headache of owing money to various different ones. For example, people might choose one of these loans if they have multiple credit cards or agreements with interest payments over 16 percent; some debt consolidation loans offer lower interest rates which can reduce monthly payments in some cases. By having a look online you will find companies such as Zopa who could help with debt consolidation. Compare your current interest rates on your debts to rates offered by personal loan companies for the sum of your debts – you may be surprised how much less interest you could be paying.
Cut out unnecessary spending
Do you really need all of those channels from your Satellite television provider? What about that direct debit for the mobile phone insurance that’s already covered in your home contents cover? The next tip is to go through all of your monthly expenditure with a fine tooth-comb and work out where you could make cut-backs. Just like the Government are having to with the country’s budget at the moment, you should also try and do this on a personal level to see where savings could be made. For example, could you buy supermarket-labelled food rather than branded goods? All of the little savings will add up and give you more money each month to put towards paying your debts.
Don’t get into any more debt
Although in our modern world the desire to make impulse purchases can be very strong, it’s important to only make purchases when you can afford to do so. This means not buying anything else on credit cards or store accounts and not taking out any kind of loan to do so. Whilst it can be a little disheartening to not buy that new computer or item of clothing, learning to resist temptation is the first step into living the debt-free lifestyle. So, only buy things when you have enough money in your bank account, and only after you have worked out that it won’t leave you too short to pay your bills and mortgage/rent.
Make a plan and stick with it
Once you’ve decided on your approach to become debt free, the most important thing is to stick to your plan and have an end goal in sight. Having a target helps you stay focused along the way. A committed plan to repaying debts cheaply, cutting out unnecessary spending, and not getting into any more debt will provide a light at the end of the tunnel and help you become debt free.