We talk a lot on this blog about how to reduce your debt. What we haven’t spoken in detail about is how to deal with debts that you cannot get rid of. For many people that is simply the state of their life. Hence we thought it a good time to look how to deal with debt from a different angle. So we take a look at how to reduce interest on existing debt that you are not yet in a position to pay off.
The first option is to move your money if you have debt on a credit card or loan. If you have credit that is attracting high interest rates now, it is highly unlikely that your existing lender will agree to lower those rates. It’s simply not in their interest to do so they’re a business looking to make money out of people. Therefore the best alternative is to move that money to someone else someone else is prepared to offer you better rates of interest by which we mean lower rates this of course saves you money but it also frees money as the last interest you paid the more spare money you have to make your payments and lower your debt so it works on multiple levels
The first way to do this is a balance transfer card. You can go to any credit card comparison site and you will see credit cards sectioned into different types. The attraction of the balance transfer card is obvious. Quite simply, it does what it says on the tin. So basically you move your money to this card and you stop paying interest rates. Sounds too good to be true? Well that is the situation, there are few catches. The one downside is that you must pay a fee to do this. This is normally a percentage of the money you move across so maybe a 5% set fee for whatever amount of money you want to transfer to this balance transfer card.
However if you’re playing high transfer high interest rates every month it is well worth taking this one-off hit to move your money across. The important thing though is to keep moving that money once the offer on the balance transfer card is over. Creditors have reduced the average length of such 0% offers in recent years. The offer of 0% interest will not last forever and when the offer ends you will resume paying very high non competitive interest rates. We suggest that if you cannot pay off your credit card balance before the offer expires, move the money again. Just always make sure that the fee you pay to move toward it is less than the interest you would pay by leaving the money where it is.
OK earlier I said the existing credit card companies are not going to change the rates they charge you but that is not strictly true in November last year with persistent debts hanging over me I decided because of the conditions in the climate in the world right now in the UK of course and the fact that many people are struggling to get by financially I contacted my credit card suppliers and asked them if any of them would freeze my interest rates for the short term. In order to help me lower my debt. I did not expect any of them to agree to it but three of them actually did so it could be worth you contacting your providers and asking them if there’s anything they can do to lower your costs that helps you pay off your debt earlier.
The alternative to that is going on a debt management program but that comes with its own costs. These costs hardly makes it worth doing and of course it will deeply affect your credit rating. As the first port of call always try and pay off your debts first by traditional methods and move your money around to get the lowest interest rates and fees possible.
Another alternative is to use credit cards in a more savvy manner. There are other credit cards that operates rewards. Y ou can use these awards to get money back and by getting money back you effectively are reducing your losses on existing debt just always ensure that you pay back what you boil on these reward cards so that you don’t start attracting high interest rates on late these cards as well as on the cards you already own.
The next option is to move credit card debt to alone and instead of paying high rates on a low considered peer to peer loans such as those offered by Zopa this relies on you having a fairly good credit score but if you do you in a good position to move your debt around to avoid Sky high rates and Zopa will offer lower rates on loans and most loan providers on the market what’s more the more you borrow or wish to borrow the lower the rate will be and it will not leave a hard mark on your credit report to inquire whether you are eligible for a loan from them this effects live becomes a form of debt consolidation well you move multiple debts to one simple monthly repayments with a lower interest rate thus saving you considerable amounts of money.