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Not Using The Cheapest
Form Of Debt Available
- Home loans offer cheaper
credit, and one way to
give yourself some breathing
space is to
consolidate
your debt into your bond.
This is where interest rates are
much lower than credit card,
personal loans and vehicle
finance.
-
In order for this to be
beneficial, you have to repay
the loan over the short term
rather than capitalizing it over
20 year term. Be sure that you
are disciplined enough,
otherwise you will end up paying
much more!
-
Credit cards and bank
overdrafts to name a few can
attract maximum interest, so
adding them to your lower
interest bond can save you even
more money.
-
Saving on interest has the
same net result as earning
interest.
-
The savings are due to your
bond being the cheapest form of
debt available.
-
By consolidating all your debt
into one account, you will also
save a lot on monthly charges
for all your separate accounts.
If you calculate all the monthly
administration fees for your
mortgage bond, personal loans,
HP installments, bank overdraft,
retail credit card etc, this can
add up to a substantial amount
at the end of the day!
Beware Of Plastic!
- Store cards and credit cards
may be convenient, but they are
also an easy way getting caught
up in the debt trap. The reality
is that in most cases people get
so dependant on this kind of
credit that it ends up being a
long term liability.
- The best investment you can
make is to repay high interest
debt. By paying off debt, you
get one of the best returns
available, tax-free. The
tax-free return you receive from
paying off debt is likely to be
greater than any returns (which
are likely to be taxed) you
receive from an investment.
- Always pay the full amount
owing on your credit card. If
you do not, you will be charged
a punishing rate of interest
from the date of purchase. The
so-called budget account on your
credit card is a misnomer, as
you pay a high rate of interest.
- Use a credit card to get 55
days’ interest-free credit by
buying at the start of the
buy-and-pay cycle and repaying
the debt in full by the due
date. This option does not apply
to cash withdrawals and petrol
purchases, on which you pay
punitive interest rates from the
date of the transaction.
Taking Your Credit For
Granted
- Unfortunately you may be
reading this too late to have
kept you from making this
mistake, but it is never too
late to start improving your
credit rating.
- In the last few years the way
lending decisions are made has
become much more automated. The
way decisions are made has
changed dramatically, for the
most part decisions are made
based on certain guidelines and
not left up to subjective
humans.
- This places more and more
importance on your credit rating
when applying for a loan. How
good your credit rating or
“scores” are, depends on
several factors such as: Current
credit balances, amount of
current available credit, late
payments (How many, How late,
How recent, Type of Account) and
recent inquiries about your
credit.
- If you are planning on getting
a mortgage loan, make sure you
are making all of your current
payments on time and avoid any
unnecessary inquiries into your
credit. In other words, don’t
go out shopping for a car or new
furniture and have sales people
all over town running credit
checks on you.
- If you want to have the
highest scores possible, and
therefore qualify for the best
rates available, it is best to
be patient and wait until your
loan is done before you do
things that will affect your
score.
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