Yup – we all have debt, and we all want to be debt free. So which debt should we pay off first?

Let’s make a plan.

To figure out which debt you should pay off first, start by identifying the following:

• who you owe,

• what the interest rate is

• when is the debt due to be repaid (they call this the loan maturity date)

• any fees associated with the loan and the repayments

• your current loan balance; and

• the frequency of your payments.

Do this with each loan that you owe money on.

If some of your debt is on credit cards

You may be able to do a balance transfer to a different credit card with an interest free period. If this is the case then get that application underway as soon as possible and the amount that you were paying on the credit cards will go to paying off the principal and not interest for at least the interest free period. This is an easy way to make a start on paying off your debt.

Next step is to work out what surplus (if any) you have

This can be used to make additional or higher payments, to get those debts paid off faster. So which debt should you be using your surplus to pay down? Apply the surplus to the debt with the highest interest first.  The additional amount you pay off this loan will save you the most interest over time.

We strongly suggest you work with a financial adviser

We will always look at ways to make additional savings for you y combining one or more of your debts and finding cheaper loan terms where we can. This is what we love to do – use our tools and networks to benefit you!

Sometimes it is not about making savings (although is always the ideal goal), it is about adjusting the loan repayments to ensure that you can continue to make the payments and not fall behind in your payments. With the increase in your weekly shop and increased fuel prices, your household budget may be feeling the squeeze and if you have no room to cut costs to be able to meet your payments you may need to adjust your loan and debt repayments. Missing payments can lead to big penalties, which is a quick way to reverse all your hard work in paying off your debt!

Seek advice and support early by talking to us.  The moment you are late with a loan repayment or you start to operate your accounts beyond their limits, it becomes more difficult to put alternate arrangements in place. Especially with the CCCFA rules in place at the moment, which mean that banks are needing to be overly cautious about lending to you.

So to sum up

Get really clear about what you owe, and all interest rates and payments associated with the debt.

 

Do a credit card transfer to get no interest terms if possible.

 

Pay off the debts with the highest interest first.

 

Take to your financial adviser to make the most of your money!

We are always here to talk your situation through – please get in touch if you are feeling stressed about your finances, and we can work with you to find a solution.

Get in touch with us for a no obligation chat.