As the consumer credit market continues to find new and interesting ways in which to provide loans and credit cards, despite the recession, it seems that the British public’s love affair with lending has not been cooled by the problems in the economy. Many industry reports highlight that more and more of us are relying on unsecured loans and overdrafts to make it from one pay day to the next and the rise of the short term loan (often known as a pay day loan) providers is further evidence that many people are still taking on further debt. Many polls and research have also identified that while many people are less keen to take out loans; those that do are keenly focused on repayment and early repayment if possible. So what are the best ways to clear your debts and how can you save hundreds or thousands in interest payments?
Interest Matters
In addition to the actual cash you’ve borrowed, you’ll also be paying interest on this amount. The higher the amount, the more interest owed. Different providers will charge different rates of interest, making some types of credit more expensive than others. The most expensive type of credit is usually a credit card and some pay day loans have a high rate as well. If you have more than one type of credit it makes sense to focus on paying off the most expensive loans first and this means that apart from paying the standard payments on each type of loan you should consider making additional payments on the more expensive loans that you hold.
Splitting Payments
One way to cut the amount of interest you pay on your loans is to consider making two payments each month. It’s important to discuss this with your lender to ensure that there are no penalties for early repayment. However, two payments mean that you will chip away at the interest and reduce it far more quickly and this should cut a serious chunk off the overall repayment amount over the term of the loan. Making two payments a month also means you’ll actually pay one extra payment in the year; if your finances cannot be stretched to regular double monthly payments it can make sense to simply make this one extra loan payment at some point during the year, if a bonus at work or overtime allows!
The Beauty of Round Numbers
Round figures are much tidier than odd numbers; by rounding up your payment amounts you can make a serious impact on the time it takes to clear the loan and the amount you pay. As an example if a monthly payment is £164 rounding this up to £200 will reduce the loan quickly, and you’ll pay less interest over the period. If possible simply add another fifty or hundred pounds to the payment, every month if possible but at least several times a year.
Second Careers and Small Sums
Finding ways to make extra cash will always be a sensible step for anybody who is determined to cut their own personal debt. You don’t have to take on a second job to make an additional income but simply make use of sites such as eBay and Amazon, or by freelancing in your spare time on sites like People per Hour. Any additional cash can be directed to the loan account to help reduce the overall amount. While the odd £20 here and there may seem insignificant it’s surprising just how quickly these small sums can add up and make a real difference. Many of us do rely on some form of credit to make ends meet, but by managing your debt proactively it’s possible to keep the costs down and clear your debts far more rapidly than you may think!
William Bancs is a freelance writer who is passionate about saving as much money as possible. With many of us turning to sites like Quickquid for short term loans, he believes it’s important to micro-manage your money to stay in control.