5 Ways to Help Reduce What you Owe
We found out that one in four will start the New Year having an average credit card debt of around £400. Each year billions of pounds worth of debt goes onto credit cards to pay for the festive period. It’s also believed that around 50% of Brits will still be repaying the debt when the next Christmas arrives.
The conducted survey discovered that on average per year around 8% of customers are still paying off credit card debts from the Christmas period. 48% of those who were questioned said they were entering the New Year concerned about their level of debt, and 9% extremely concerned.
Note: These figures came from a survey of around 4,000 customers put together by a comparison website called uSwitch.
1. Look at Moving Your Debts
Firstly, check your credit score. If you’ve got a good credit rating you might be able to cut the cost of borrowing by moving your debt to acquire a lower interest rate. This is a great option to help with any credit card debt and is worth looking into. If you have any credit card debt being charged at a high-interest rate, you might be able to transfer your current balance on to a card with a better rate.
Search ‘credit card balance transfer deals’ on the web, this will show various options that all charge no interest for a set period. Some offer up to 38 months on balances switched to them. Practical examples have been advertised on the Martin Lewis money saving expert program. Some people have saved close to £1000 from what they would have paid over a year in interest.
Please be aware that all of these transfer card deals usually charge a one-off fee for moving your balance to them. Most companies seem to charge an average of around 3% for the amount that is being transferred. Make sure you calculate this charge before going ahead to help understand the total amount you will save.
Note: 0% interest credit card deals are only available for customers with a good record of managing their finances and credit.
2. Try to Organise Your Finances
There are many ways of organising your household bills. If you can adopt some sort of a system to monitor everything – like a calendar, financial list or diary, this will help to stay organised. You can include things like your direct debit dates, how much is going in and out each month, and also a note of any up and coming finances needing to be paid e.g. a holiday.
The list below gives an example of some items which might be included in your average household financial list:
- Car MOT and service dates
- Birthdays, holidays, Christmas etc.
- Fixed-rate energy tariffs expiry date
- The expiry of your mobile phone contract
- When the 0% credit card deal ends
- Car / Home Insurance renewal dates
- The end date of the mortgage’s fixed rate
- Monthly income (acts as a visual reminder)
- Monthly DD costs (acts as a visual reminder)
- Disposable monthly allowance (acts as a visual reminder)
- Unexpected costs for that month (provides a forecast for following months)
This will really help when planning to manage all your finances each month. It can also give you an advantage when booking a holiday or paying for Christmas. Using this method will give you the time to plan and understand what you can and cannot afford. Hopefully, by using this method, you won’t have to make any last minute decisions to support any financial purchases or bills.
If you incur any unexpected costs always try to use this list to recalculate what you can afford It will also provide a financial forecast for the following months.
3. Try to Increase Your Repayments
We found on uSwitch that between April and September, around 10% of customers that used its comparison service to switch energy provider for gas and electricity saved around £500.
Value for money – It’s always important to make sure you’re getting the best value for the money you’re spending. Most people pay too much for the convenience factor. If you can, try to always shop around for anything you’re looking to buy, as comparing costs is a savvy money saving tactic. For example, a lot of supermarkets tend to reduce certain food items at the end of the day. If you can do your shop later on in the evening, this could shave a big chunk off your food bill.
Use savings – If you can look to use any savings or start using more of your disposable income every month, this will help to pay off your debt. The more you reduce what you owe, the less you will pay in interest, meaning you’ll be debt free sooner rather than later.
Direct debits – Keep an eye on all your direct debits. You can often find yourself paying for something which you don’t need or have even forgotten about. Regularly staying on top of this will also give you the chance to look at any direct debits that you feel you can do without. This can assist with increasing your disposable income to then increase your repayment amount.
Remember, every little helps!
4. Look at Changing Bank
Many banks are seeking different ways of bringing in custom. One of these is an introductory based deal giving you money when you switch. The maximum amount you can receive for switching is normally around £100 – £125. It’s worth checking how this is paid before you go ahead, as some offer the value in vouchers. The process is easy and can provide a quick cash injection to help reduce or save on bills.
Banks also provide something which is known as the ‘switch guarantee’. So, if anything goes wrong through the transition period you will be covered for any costs.
5. Research Consolidating Your Debt
If you have multiple debts consolidating them could offer a better repayment option. For example, some people have numerous credit cards and are only managing to pay the interest on each one. Meaning, the process of repaying the full amount on each card will be difficult for any individual.
Consolidation works in the way that you would take out a personal loan to pay off all your outstanding debts. This gives you the ease of making one repayment each month. You can apply for many different types of personal loans to suit your circumstances.
Most loan lenders will offer:
Short term loans
Bad credit loans
Larger personal loans
When you’re looking into this option make sure you shop around for the best deal possible. Most high street banks are known for charging larger interest rates. Free comparison websites normally offer more suitable rates and options for your circumstances.
Sometimes applying for that little extra can work out more cost-effective. This can offer a healthier interest rate and less to pay back when borrowing. If you opt for extra funds try not to spend the extra money you borrow and use it for your loan repayments.
Before you apply for a consolidation loan you should work out what your early repayment charges are. This is so you can calculate whether you’re better off switching or not.