Debt is one of the scariest things for people. The danger of not repaying and falling in the trap of compound interest can give you sleepless nights. Some of the methods to cut the cost of debts are explained here. Check out measures that may not seem important at a glance, but still have a strong effect on your monetary graph.
Methods to cut the cost of a debt:
Raise the credit score: One of the easiest ways to reduce a debt is to improve your current credit score. This helps a lot as a good credit rating attracts better deals and you will end up paying less interest. So, make sure you repay on time and keep a good credit score. Even if you are a first-time credit card holder or someone who is reorganizing debts, you will end up getting companies that offer credit at lower rates.
Be selective about the loan: Shop around and find providers that offer easy loans. Depending on your current situation and budget, plan a loan that you can pay off without hassle. Compare various loan providers and choose the cheapest deal of the lot.
Authorised overdraft: If you need a small amount of money for a relatively short period of time, then authorised overdraft is a good idea. You can do this by informing your bank so that it allows small, interest-free overdrafts without charging any penalties. This way, you can pay the money taken from the bank to cut down a bigger debt. As the bank amount is small, it would be easy to repay once the bigger debt is paid.
Interest free credit cards: Normally, the interest charged by credit card providers is higher than banks, but they do offer interest free credit cards which give credit without charging any interest for a specific time period. All you have to do is repay your loan within the interest free time, so as to save the interest on the balance.
Consolidated loans: It is often observed that lower interest rate is charged for larger loans with a long repayment period as this method is more profitable for the loan provider. So, if you have many small loans, credit card debts, etc. then it would be better to get them consolidated into a single bigger loan or mortgage deal.
Peer to peer lending: In this method, individuals can directly give loans to borrowers through P2P sites such as Zopa, RateSetter, etc. Unlike banks and credit card companies, there are no middle men in this case and so, borrowers get loans at much lower rates. This way, you end up getting a cheaper debt.
Credit unions: These are community co-operatives that offer loans and mortgages to people with a common bond like people working in the same industry or living in the same vicinity. They manage this by pooling their savings and lending to each other. Some of these groups have thousands of members and so, they can offer big loans. They are best for people who cannot get benefited from mainstream banking networks.
Choose soft search before applying: It is always advisable to perform a soft search. This will give you an idea about the loans you are eligible for. It is used before sending an actual application for a credit card. This helps as it saves you from applying for cards that are not suitable for you. As you know beforehand that there are chances of rejection, you do not apply to such cards and so, save yourself from a bad credit score. In short, it does not leave any scars on your credit report.
Minimise the existing debt: You need to make a plan for proper money management. List all your loans and debts, and prioritise repayment of your most expensive debt while still managing to make minimum repayments of the smaller loans.
Finish repayments before savings: Make sure that you pay your repayments well before making any extra savings. No point keeping money in a savings account when you have to pay high interest on your existing debt. It is always good to create a monetary balance. Don’t end up using your emergency funds for repayment. See that you repay the expensive debt without losing out on emergency funds.
Repay before time: Overpayment is the best way to repay a loan. It will also save you from paying extra interest over a period of time.
Talk to your lender: If things are really not working out and you cannot repay the loan, then the best way to deal with it is to talk to the lender. The lender will find a middle way out and ease the burden from your shoulders.
The above mentioned points will help you in cutting down the cost of your debt. Apply them to come out of your debt. For more details on loans, credit cards and mortgages just check freepricecompare.com. You can also call us on 02034757476.