Can more credit be a positive thing?
Bank loans can be a great way to reduce your overall repayment on outstanding debt
Often without warning, we can find ourselves in debt and no way out. Whether this situation is due to unforeseen circumstances, or reckless spending, there can be a number of positive steps you can take to get yourself back on track.
I will often advise against taking out further credit, such as bank loans to curb your financial problems, but there are times when these are a good way of saving you money in the long run. Say for example you have £10,000 outstanding on a credit card at 17.9% APR and you can only afford to pay off £200-300 per month. With interest, the total repayment costs could become astronomical - which is a good opportunity to consider additional credit.
By taking out a bank loan at say 7.9% you can make yourself some considerable savings on the total repayment amount than if you were to continue with the credit card repayments. By using a loan to cover the balance on the credit card (and of course - make sure you use the loan just for the credit card payment!), you can change the debt to something more cost efficient.
Consolidating loans can be a daunting thing to consider, especially if you already have existing debt, but think more in the longer term and you will see the value that a bank loan can have. Of course, be sure to shop around for the best rate on loans which can improve your savings in the long run.
Avoid Debt while you can
If just one person who reads this article avoids getting into debt, then i think it has been a success. Sometimes, all some people need is a quick reminder now and again, just to keep you on the track to staying debt free.
Some of these quick tips will help you avoid debt while you have a health bank balance. For the spendaholics amongst us, there are still some lessons to be learnt from these 5 quick tips to keep you out of debt:
1. Create a weekly or monthly budget and try not to overspend.
- Base this budget around your monthly income and deduct your outgoings.
- Divide the remaining money into essentials, such as food and bills.
- Try to put some money aside, if there is left over money at the end of the week.
2. Avoid using credit whenever possible - It is probably out of your budget if you are thinking about using credit cards to make the purchase. Cut up that plastic and get saving if you really want the item that bad!
3. Bin all those loan and credit card forms you receive through the mail - Avoid temptations by ditching those shiny leaflets when you want to go on a spending spree. Often lenders will sell personal data to other financial companies, when they are aware you are looking for credit.
4. Think about your savings - Learning about how to save money from an early age is a must. Even £5, £10 or £20 a month into a savings account can really add up over the years, if you have some money spare, tuck it away into a high interest account for a rainy day. This nest egg can help you if you run into financial difficulty.
5. Do some work on the side - Check your local paper and see if there are any part time jobs you could do while you have a few spare hours. The extra cash can help keep you above board, whilst your financial situation improves.
Have you been driven to Debt?
Filed under: Debt Management, Money Saving Tips, Mortgages, Savings
As if rising utility bills aren’t enough, now motoring can drive you further into debt. It’s a little bit of a catch 22 situation, as most work requires you to drive, but with rising costs for running a car, this can put you in a difficult situation.
If you are in some financial difficulty and you rely on a car to get around, take note of some of these car insurance money saving tips and you can save a few pennies along the way.
When completing a car insurance form:
- Check if your car has an advanced security device. If so, note the model and number and let your insurers know. They may offer some form of discount.
- If you have had a long period of ‘no claims, note this thoroughly as you will be rewarded with lower premiums.
- If you are an advanced driver ie: you have passed your PassPlus exam, again note this on the application as some insurers reward drivers who have this additional certificate.
- Make sure you obtain quotes from a large number of insurers before signing a contract. There are a number of car insurance comparison sites which will find you the best deal based on your car and personal details.
By following a few of these simple tips you can ensure that the pleasure of driving doesn’t drive you further into the red.
How to avoid Debt
We talk alot on this blog about how to get yourself out of debt, but we should also consider how to avoid debt in the first instance. With so many financial pressures in todays society, we should always be aware of the well known idiom:
“Prevention is better than cure”
With that in mind, it is always advisable to think before you act, because once you are in debt, it can be a vicious spiral of more and more borrowing.
If you are close to the being in the red, consider a few of these simple steps:
Spend within your means - Never intentionally spend outside your budget. The ‘buy now and think later’ attitude is a surefire way to get yourself into debt. Understand your earnings, take away your monthly expenditure and that is your expendable income.
Keep detailed financial records - Set up a simple excel spreadsheet to calculate your spending. Every time you make a purchase, add this to your spreadsheet and this will allow you to understand where your money is going. Don’t miss anything out, even small purchases add up to a considerable amount over a month.
Avoid using credit cards at every opportunity - By adding to your credit card budget when you can spend via other means, you are increasing the likelihood of overspending or forgetting about this outstanding balance. Relying on varying forms of credit for purchases can lead to a dependency on credit cards for purchases, when in reality, you can’t afford the item in the first place.
Think about your savings - There are various ways to increase your assets, through popular saving methods such as ISA’s, savings accounts, bonds and stocks. If you are able to set money aside on a monthly basis, no matter how small, this can create a ‘nest egg’ for any tough financial spells later in your life.
If you are in debt already, you can take something from these tips. Being able to budget effectively is one of the most important aspects of keeping a healthy bank balance.
