If you are looking to buy a house or improve your credit rating, the first thing you need to do is clear any old or bad debts. But where to start?
- Get a debt consolidation loan Small loans, payday loans, store and credit cards and overdrafts often charge high interest rates, which can make them very expensive. By contrast, larger bad credit loans usually attract more competitive interest rates, so if you combine all of these debts onto a single debt consolidation loan you could save money. This lets you pay off all of your current creditors at once, relieving the stress and financial pressure of having to deal with competing demands on your money, and giving you one lower monthly repayment. Norton Finance specialises in loans for bad credit, and will help you work out if you can reduce your monthly payments, your overall interest rate and even the total amount you’ll repay - just make sure you factor in any early redemption charges.
- Get a 0% interest balance transfer card If you’re only looking to clear a credit or store card debts, and you don’t have a bad credit rating, you could apply to transfer your balance(s) onto a 0% interest credit card. Cutting off additional interest will help stop your debt from growing, making it quicker and easier to pay off what you owe, and there are now deals on the market offering 0% interest periods of up to 36 months. If you take this route, make sure you budget to clear the balance within the 0% interest period rather than paying the minimum every month, or make a note of the end date so that you can transfer to another 0% interest card, otherwise you could be stung by interest costs.
- Create a debt repayment plan This involves making a list of all your current debts, including the minimum payment and the interest rate, and ranking them in the order you want to pay them off. The best way to do this is to start with the highest interest rate debts, as this will save you the most money. Then work out how much money you have to pay towards these debts every month, paying the minimum amount on all of the debts and putting any extra money towards the first debt on your list. Once this debt is paid off, put the extra money towards the next debt and so on until they are all repaid. Make sure you check each lender’s policies on extra payments, as some may charge a fee – reducing the amount you’re paying off.