Slash your Credit Cards and Loan Debts Part Two!

....transferring their debts from one to other 0% interest providers. All that says to me is they can’t afford to pay them off and it’s certain as ‘eggs is eggs’ that they will come unstuck one day! Because, every time they apply for a new credit card they leave a footprint on their credit record which, eventually, goes against their rating! Now, of course, most companies charge an ‘up-front’ interest fee which defeats the object of moving the debt!

4. Rainy day savings & investments. Have you got any rainy day savings? How much interest, net of tax, are you earning on those savings? Whatever the figure you come up with won’t be as much as the interest that is charged by the credit card companies. I have news for you – it’s raining now! Use the money to pay off your credit card debt & get it ‘earning’ the interest that is charged by the credit card companies! You can always borrow it back if the roof falls in! The same applies to other investments, check how they are performing or whether the money could be put to better use. Always check with your independent advisor if you are thinking about ‘surrendering’ your policies or investments.

Personal loans

The first thing you need to check is “are there any early repayment penalties?” There normally are and, if not, then start to accelerate payment on those loans without redemption penalties.

1. Car loan. Think about selling the car, paying off the loan and buying a cheaper one. I’m not kidding – do it!

2. Home improvement loan. This borrowing is better suited to being included within a mortgage. See the section on re-mortgaging.

3. Consolidation loan. If you have one of these, you have fallen for the biggest cons in the world of finance. All you probably did was convert short term borrowing into long term borrowing & frittered away the so-called ‘extra cash’ it generated each month. Nasty! It’s probably costing you interest at a higher rate & usually comes with onerous early redemption penalties. There’s no easy solution to this one you’ve just got to grin and bear it and put it down to experience. The moral of the story is “don’t use a consolidation loan”.

4. Furniture/Household appliances loans. These are probably the small loans that you should attack first and pay off because once paid they then release more cash for other debts. Consider using a credit card to pay them off because even though the interest charge may be higher you release that ‘extra cash flow’ it generates when you consolidate which should be used for accelerating payment off the credit cards as shown in the above section. The consolidation in this instance makes sense because you are not extending the time period necessarily.

The problem with personal loans are the penalties for early repayment. Psychologically it might be better to just pay them off & swallow the bitter pill called ‘penalty’.

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