Start the year 2018 with 6 tips to cut down on borrowing.
Read on with Personal Loans Now and make a resolution to get your personal debt and finances in order with our simple step-by-step guide.
- Cut credit card costs
- Reduce your overdraft
- Debt consolidation as a way to pay less
- Become a member of a Credit Union
- Plan for next Christmas
- Conclusion – personal debt
Personal Debt Management
For the 55% of Britons who put their Christmas presents on credit (statistics from National Debtline), the beginning of the new year is the time to face the music and start paying those debts off. According to the charity, an estimated 7.9 million Britons will fall behind with their financial commitments as a result of overspending during the Festive Season and the Boxing Day Sales. This is 5% higher than January 2017 and comes after research that showed unsecured consumer lending in the UK had increased by 9% in the year up to November 2017.
In this article, we give you six simple steps to get your finances back on track, cut your personal debt and make a new start in the New Year. We also advise you on how to avoid this happening to you again next year.
1. Cut Credit Card Costs
Revolving credit like credit cards are convenient, but they have one of the highest interest rates. To reduce the money you’re paying to your credit card provider, try and take advantage of one of the balance transfer offers by switching provider. If you meet the criteria, you can be eligible for interest-free repayments for up to 38 months. This means that any payment goes directly towards reducing the outstanding debt (rather than for the interest) and allows you to pay off the debt so much faster.
To be eligible for such offers, you must have a decent credit score and be disciplined enough not to put more credit on the card and build up the debt again. Another thing to remember is that there’s usually a fee to switch providers. This usually gets calculated as a percentage of the money you owe on the card. Finally, you should set up a direct debit so that your credit card payments are made on time without fail. The terms of these promotional deals usually mean that the offer is cancelled if you’re late with one payment.
2. Reduce Your Overdraft
Although overdrafts have traditionally been seen as short-term facilities to cover unexpected expenditure, the StepChange charity found that 2 million Britons constantly have an overdraft. Some financial institutions have already changed their charges for authorised overdrafts. The regulations governing the fees associated with them are due to change further in 2018 across the whole market. However, there isn’t an industry standard so you might be charged daily/monthly fees, interest on the amount borrowed or even a combination of all three.
One popular misconception is that you aren’t allowed to switch current accounts if you’re overdrawn. It’s possible to transfer your account, but you must agree to the terms of your overdraft facility with your new bank or building society first. In order to find more favourable terms, shop around and use the overdraft calculator on the websites of different financial institutions.
3. Debt Consolidation as a Way to Pay Less
If your outstanding debts are mainly in the form of high-interest consumer credit (such as store charge cards or credit cards), one way to cut the money you pay is to take out a personal loan. In this way, you can use it to pay off all your debts and have only one repayment to make every month. Not only is the interest rate for personal loans cheaper but with a fixed interest rate, payments remain the same. This is beneficial as knowing how much you have to pay every month allows you to budget more efficiently. Before applying for a personal loan, check your credit score and also any arrangement fees imposed by the bank.
For debt consolidation to work well, you must be very careful not to run up further debts on cards. It’s very easy to fall back into your old ways and use plastic to make purchases. If this happens, you’ll end up having to pay more for both the personal loan and credit card repayments. This could leave you in a position worse off than before.
4. Start the Year with a Budget
The New Year is the ideal time to re-examine your financial situation. List your priority bills and look for ways to cut down on how much you pay. For non-essential expenditure, analyse where your money goes and see what small changes you can make to your spending habits so that your money lasts longer. This will prevent you running up more debts in 2018 and help to get your finances back on track without having to take out a short term loan to pay your monthly bills.
5. Become a Member of a Credit Union
Don’t think that you need to save large sums of money to become a member of a Credit Union. Just putting a small quantity every month, you will soon see the amount build up. Also, it’s an excellent way to get into the habit of saving. The main benefit of being a member of a Credit Union is that if you need money urgently in the future, you’ll access much lower rates of interest than High Street banks and building societies.
6. Plan for Christmas 2018
With the memory of last Christmas fresh in our minds, it might seem strange to start thinking about next year, but it’s never too early to start. Although the National Debtline found that 55% of Britons in their poll hadn’t saved beforehand for Christmas expenditure, 23% said that they would be doing so this year.
To avoid putting Christmas expenditure on credit, make a start by putting some money by from now. Some Credit Unions have special savings accounts for this very purpose. Think of how much less you’ll borrow next year if you have some cash saved.
Conclusion – Personal Debt
The beginning of the year is the best time to make a fresh start. Make a New Year resolution to get your financial situation in order. There are many ways to cut down on your debts and reduce how much you borrow. Not only will it make your money situation better but it’ll also make you feel better. Particularly when there will be no need for you to take out instant loans for bad credit to cover your monthly expenses.