Reduce Your Debts

Is it time to reduce your debts? Are you in a stack of debt?

Heard about a special mortgage deal but wonder if you can get a better offer elsewhere? With interest rates rising in this climate of financial insecurity, it is more important than ever to tackle these questions.

The best way to steer a course through this quagmire and reduce your debts is to become a savvy consumer.

How Borrowing Works

It's not just about the interest rates, but also the term of the loan. As an example most people blindly believe that a five percent interest rate is far better than a ten percent interest rate.

Is this right ? It actually depends.

If you repay $1,000 at 10 percent over five years it will cost you $260 in interest but if you repay the same at just 5 percent over a 25-year mortgage term it will cost you a massive $740.

Beware Compound Interest

Borrowing money has a raft of hidden costs and compounding interest ensures that even on just percent interest on a tiny loan such as $100, if not paid back quickly, can increase sixfold. Imagine how much this could be cost you if we are talking about $10,000 or $100,000..

Credit Cards

Credit cards if used wisely can save you a fortune when used in combination with a mortgage offset account, but for the majority of people the ease of use means that they don't have the discipline to correctly manage their finances properly.

For some people the whole reason they end up with Debt Problems is because they could not control their credit card spending.

Improve Your Credit Rating

Your credit rating means that your neighbour could be able to borrow money (from the same bank or finance company) at a rate and conditions fary better than you can get, simply because he has a better credit history.

If you get a bad credit rating the resultant loss to your bargaining power when negotiating new finance can end up costing your thousands and thousands of dollars.

Beat Debt Crisis

There really is no secret in beating a debt crisis. In fact there is four fundamental cornerstones when dealing with debt crisis -

• cut your expenditure,
• lower your interest,
• pay off the loans with the biggest interest first
• and use any free help available.