Cutting the Cost of Debt


If you have any debts at all, unless you’re really savvy, chances are you’re spending money on interest payments each month. If you are paying interest, your debt is costing you money and lowering your bank balance all the time.

The good news is that it is possible to cut the cost of debt so that you’re paying back less to the banks and financial institutions and keeping more money in your wallet each month.

Here are a few simple things you can do to cut the cost of your debt right now:

Refinance Your Debts. If you’re currently paying off something like a mortgage or personal loan, and interest rates are now lower than they were when you took out that particular line of credit, it could be with refinancing your debt, so that you can take advantage of the lower interest rates, and in most cases, start paying less in repayments each month. If it’s a mortgage you have, you might even be able to apply for a cash-out refinance, which would enable you to borrow more money than you owe on your home right now, which you can then use to pay off other debts with higher interest levels for even more savings.

If you are thinking about refinancing to cut the cost of your debts, you must, however, bear in mind that there are some costs associated with refinancing, and you should factor them into your calculations to ensure that you really will be saving money before making the plunge. You should also bear in mind that your home will be used as collateral for refinancing, so it’s something you should only do if you’re in a relatively secure situation.

Consolidate Your Debts.  Another very effective way of cutting your debts is via debt consolidations. If you look at this loan information, you will see that you can take out a loan to cover your outstanding personal credit card and loan debts and cut your interest repayment rates significantly. You do this by using your debt consolidation loan to pay off other debts so that you only have one manageable monthly repayment to make.
Obviously, if you decide to go down this route, you’ll need to calculate how much interest you're paying on all your separate credit cards and loans each  month and choose a consolidation loan with a lower interest rate, but other than that, this is a great technique which could really bolster your financial situation.

Transfer Your Balances.  If you have credit card debts, and your credit rating is still good enough that you are likely to be approved for more credit cards, you might want to consider applying for a credit card that has a 0% interest offer on balance transfers. Then, you can transfer the balance from your other cards onto that one to stop paying interest.

You will usually have to pay a fee of between 1 and 5 percent when you transfer your balance, but this will typically be cheaper than any interest payments you’re making, and because you can avoid paying interest for anywhere between 3 and 43 months, it represents a really great deal.

Pay More Than the Minimum.  If you’re stuck with credit card debt that you can’t transfer or use a consolidation loan to deal with, one thing you can do to cut the cost of interest is to pay more than the minimum repayment each month.
If you only pay the minimum, it will take you much longer to clear the balance, and all that time you will be accruing interest not only on the original balance but on the interest too, which can all too easily lead to your debts becoming unmanageable.

Use Your Assets.

Another thing that is at least worth considering is the possibility of using any assets you have to pay down debts. If you have a good chunk of savings, shares or other investments, which you can withdraw funds from, doing so could be the sensible option, if the amount of interest you are earning on them is typically lower than the amount of interest you are being charged on your debts.

Of course, you should think carefully about this, because you may be subject to tax penalties if you take this route, and if you don’t have any savings and you run into difficulties, life could be made harder for you, but if after doing the relevant calculations, you think you can make it work for you, it’s certainly worthwhile.

Pay On Time.  One of the simplest ways to minimize the amount of cash you’re paying to your creditors is, of course, to ensure that you pay all of your credit card and loan payments on time every month. If you don’t, you will more than likely be charged a late payment fee, which can be quite expensive and which can contribute your debt problem if you have one. The easiest way to do this is by automating your monthly debt repayments so that you don’t even have to think about it.

Speak to a Debt Counselor.  If you’re in financial difficulties, and you’re really struggling to pay back even the minimum repayment amount every month, the worst thing you can possibly do is to ignore the situation and hope that it goes away. Doing that will just lead to charge after charge being added to your account and eventually, the repo men turning up at your door.
If you get in touch with a debt counselor, they may be able to help you cut the cost of your debt by having your interest repayments frozen for a period. They may also be able to get your monthly repayments lowered, so that you have a bit of breathing space to work on the situation.

Cutting the cost of debt and ensuring that you keep more of the money you earn, as you can see, isn’t a particularly difficult things to do, but it does take a little effort; you will need to sit down and make a few calculations to see which, if any of these suggestions could help your financial situation, but it is well-worth doing if you want to improve your financial situation.

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