Debt Management is Simpler Than You Think

If like most people you have outstanding loans, credit cards, store cards or any type of debt for that matter, then you will understand how difficult it is to make ends meet. Wouldn’t it be nice to be in the black with money being saved each month? This may seem like a million miles away at the moment but it is possible to accelerate towards this.

Clear Your Debts

One important thing to consider is that there is no point in trying to save money whilst being in debt. Interest rates are so low at the moment that you are going to get next to nothing on your savings. What is the point of having cash sitting in an ISA or savings account earning a small amount of interest when you are probably paying a huge amount more in interest on any loans or credit cards you might have. It’s a false economy!

If you have any savings, unless of course you are saving for something in particular such as a new car, TV or holiday then it’s financially sensible to use the savings to pay a credit card balance off. All of a sudden the money you were using to pay your credit card off each month becomes free to use on something else. You can now use this to over pay on your loan or mortgage. Most mortgages allow you to overpay without penalty by a certain percentage each year, usually between 10 and 15 percent.

It’s slightly different with a loan so just make sure you don’t overpay so much that you completely pay the balance off. Leave £50 – £100 pounds and pay it off the next month. This should avoid any early repayment penalties but check your terms and conditions first.

Hopefully, if you have been sensible with your money, not overspent on luxuries, and used all available spare cash to overpay on your credit cards and loans then you will soon become debt free and just have your mortgage or rent as the only major expense each month. You now have the choice to use the money you would have used on these debts to either save for a deposit on your first house or to overpay your existing mortgage.  Of course, after a few years of trying to clear your debts you may want to use it on a well deserved holiday or a new car. Whatever you do don’t allow yourself to start overspending otherwise you will soon be back to square one.

Clearing unwanted debt can be a long road due to the expenses of everyday life but if you can afford to overpay anything at all then make it happen. If you are lucky enough to receive a bonus from your work then use it to pay off a loan or credit card even though the more exciting thing maybe to blow it on a holiday or new Cinema system. You will be better off for it in the near future.

There is nothing wrong with trying to save money for the future but if you have plenty of outstanding debt there just isn’t any point until this debt is cleared. Get rid of the debt first then look forward to a less stressful future with your finances fully intact.

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