3 tips to reduce interest on your debts!
- Use your home equity to consolidate your debts.
Consolidating means rolling all your debts into one, thus treating all the debts as one single debt. Using the equity in your home may save you in the long run. Home loans often bring with them a far low interest rate than unsecured personal loans, credit cards and other types of credit facilities. If you have an equity, you could refinance in order to pay off your debts and pay back at a lower interest rate.
You could accumulate all these into a single loan with one, easier to manage repayment. It also allows you to spread your repayments over a certain period of time, making payment easier.
- Stop paying too much on your home loan.
There are quite a lot of ways to reduce the interest rates on your home loan. You can pay in more frequent installments – such as weekly or fortnightly rather than on a monthly basis, you could make use of a mortgage offset account if you have one, or you can make extra repayments on your home loan advance to reduce the interest payable. Another way to reduce the interest you pay on your home loan is to make sure you don’t miss your annual mortgage review – so you won’t be paying more than you should be and can maximize your savings.
As a mortgage broker and finance professional, we provide a complimentary annual review and home loan health check which has saved our clients in both interest and fees. With regular maintenance you can always make sure you are not over paying!
Most home owners don’t give much thought to paying interest on their purchases. For many of us, it is a price to be paid in order to get what we want. And when you’re lending money to make more money, as is the case with a investment home loan, the interest incured may be considered a necessary evil in order to get what you want.
- Pay off your credit card each month in full.
Many of us tend to think it wise to make use of our credit card on a regular basis. After all, why wouldn’t you want to earn all those frequent flyer points? But in terms of interest payments, this can be one of the most expensive forms of debt there is. If you give it a really good thought, your credit card interest rate can often be well above 20% per annum – more if you take a cash advance! You’re paying 20% more for purchase’s you make if you take over a year to pay it off – and don’t forget this has a compounding effect each year you don’t pay it off.
Avoid using your credit card if you know you are not likely to clear it our at the end of the month and stick to using your savings. Keep your credit card in the event of an emergency, or better yet – keep a health savings balance or mortgage redraw available. This may mean saving up for larger purchases rather than buying them immediately with your credit card.
When you do have to make a purchase with your credit card, you should try to pay it off as soon as you can – within the interest free period if at all possible. Some credit cards offer 55 days’ interest free on purchases, so choose whichever favors you best.
Choose wisely, if you need advice on what options are available to you then speak with your mortgage and finance professional and make sure you seek out the right information
As your mortgage and finance advisor, we can help you with all your financing needs including budgeting, debt management and debt consolidation. Reduce your debts so you can put your money to very good use and also make good investments that’ll yield good returns in the future.