Tips to stop racking up debt
At this moment of financial crisis, many families are finding it difficult to make ends meet. It can be really tempting to take out loans or credit cards, or even remortgage in order to raise finance but, if you can avoid debt, it’s always best not to use these methods, however I appreciate that’s not always possible. You could also consider companies like Debt Free Direct to help with your debt problems.
These are my top 5 tips to become debt free:
1. If you can use your savings instead, do that. I’m amazed by how many people there are who have savings AND card debt. Savings interest rates are low at the moment, only around 2-3%, and many credit cards and loans have rates many times higher than this. For store cards, you’re looking at around 30%! So the interest you make on savings is a lot lower than what you’ll be paying on the debt. Therefore, it’s much better to spend savings instead of putting it on a card.
2. If you don’t have savings you can spend or pay off debts with my next tip is to see if you can work any extra hours at work, or take on an additional job, if it’s possible. That way you can make some extra money which you can spend instead of increasing your debt.
3. Don’t use credit cards to take out cash. Some people aren’t aware of this but the interest rates can be much higher and start to apply sooner on cash taken out with credit cards than normal transactions. If you use your credit card to take out cash you could be saddled with expensive charges and interests that could otherwise be avoided.
4. If your family or a close friend has the means and is willing or has offered, consider asking if you can borrow money from them instead of from a bank. They might not charge you any interest but please remember not to take advantage of your family’s generosity, and come to an agreement when and how you will pay the money back – AND STICK TO IT to avoid any rows between family members.
5. This is the most obvious one of all but it’s so easy not to pay attention to this and I’m sure many of us have been guilty in the past. This is especially important now with the threat of a recession looming. If you can’t afford (it and it’s not an essential item like food or electricity) don’t buy it!
