Having debt can be really stressful! The thing is, it happens. Getting on top of it takes a bit of planning.
Sometimes we can find ourselves in a situation where we have multiple debts – a few thousand on a credit card, finance for the car you bought a couple of years ago, a gem card, the mortgage, maybe a store card you’re trying to ignore, or maybe you are using your overdraft regularly.
Having multiple debts can be overwhelming and it may feel easier to ignore it, in the short term. The longer you ignore it the more it will cost you.
When we grit our teeth and decide to have a go at clearing that debt it’s tempting to try and get the smaller debts paid off first, so that we can reduce the number of debts that we have. This is not always the best option.
Do a stock take of all your debts, noting the outstanding amounts, the term remaining on the debt if there is one, and of the course the interest rate. It is also important to know if there are any fees for repaying early or of increasing your payments. Many lenders have sneaky fees.
The best debts to pay off quickly are the ones with high interest rates. Being smart about how you pay off your debt will ensure that you pay less money in the long term, it’s always a good idea to have the big picture in mind.
While the interest rate on your loan is important, the term of the loan is equally important. If you have debt at 21% interest with 18 months left to run, switching to a lower interest rate is only beneficial if you’re retaining the same term (or reducing it). Otherwise, you may pay more interest in the long run.
When our finances get too hard, the tendency is to bury our heads in the sand. Having support from a financial adviser to lead you through this difficult time with some solid financial planning will make all the difference to how you recover financially and set you up for getting ahead.
We can talk you through your options and help you to refinance your different debts into a single loan, simplify your life and generally save you money and stress. Paying off one sum is sometimes the better option.
With some smart financial planning and a debt consolidation plan we can refinance your debts to ease your cash flow and save you paying high interest rates.
Here are a couple of previous blog posts which will help you to understand debt and how it works.