Avoiding high interest loans is the first step in getting your personal finances on track. Without spending money on interest every month, many people discover that they’re able to save money and eventually avoid debt all together. If you want to stop sending money to debt collectors every month, try these tips from CB Online.
1. Pay off your high interest debt first. In order to avoid high interest loans, you have to get rid of the bad debt you already have. Make a list of your debts in order of interest rate. Then, instead of sending a little extra money to a variety of companies every month, send as much as you can to the loan at the top of your list. In addition to paying less in interest over the life of your loans, eliminating a monthly bill as you pay off a loan will free up money that can be used to shore up your savings or pay off other debt.
2. Once you have a debt paid off, don’t open it up again. In the case of high interest credit cards, cut the card. If you pay off a high interest personal or payday loan, look for a line of credit at a lower interest rate. If you need a line of credit for emergencies, leave one card with the lowest interest rate open, but keep it out of your wallet. This will prevent you from racking up more debt.
3. Start a savings account. Even if you can only put a few pounds a month into the account, start saving now. Even a small amount of savings can pay for an emergency home repair or small trip. Furthermore, getting into the habit of saving small amounts will make it easier to save larger amounts of money later.
4. Negotiate lower interest rates on your current loans. After you pay off some of your highest interest rate debt and have a small amount in savings, your credit report and score will start to improve. This means that you will be in a much better bargaining position to ask for lower interest rates on your remaining debt. When negotiating, be polite, and point out any offers you have from other banks for lower rate loans and credit cards. The possibility of losing you as a customer is usually enough to convince a company to lower your interest rate.
5. Refinance your debt. Of course, if the company won’t agree to lower your interest rate, it’s time to look for a company with a better offer. While credit cards offers show up in the mail all the time, you might also want to consider refinancing your vehicles or home as your credit improves.