If you’re not in control of your financial situation, then you’re not in control of your life. Having to worry about money often means surrendering more and more of your working life – and if you owe money to many different debtors, the stress can be considerable.
Fortunately, getting control of your debts, and your other bills, doesn’t have to be complicated. Let’s look through the problem.
Understanding What You Currently Pay
To begin with, you’ll need to know how much you owe, to whom, and how much you’re being charged in interest. Get everything down on paper so that you can get a good overview of your financial life. Including credit cards, in-store credit, loans, overdrafts, and every other kind of debt. Even a small debt could be important, and you need to see the full picture.
Why High Interest Rates Are Costing You More
Interest is cumulative, and often compounds over time. In other words, if you’re being charged just a few per cent each year, then you can expect to pay even more the following year – because you’ll end up paying interest on top of interest. This is why high-interest debts like credit cards and overdrafts can become a trap, especially if you don’t have a plan to get them paid off.
Up until relatively recently, interest rates have been extremely low. During the Covid-19 pandemic, the Bank of England pushed the base rate all the way down to 0.1%. Since then, however, there’s been a surge of inflation that has led central banks to push those base interest rates back up. As a result, taking on a new debt now could be much more expensive.
Consolidating Debts Into One Lower Interest Payment
If you’re struggling to deal with many different debts at the same time, then bringing them all together into a single loan might be the best move. This will not only simplify your financial affairs – it might also drive down the overall cost of your debts, especially if you’re consolidating loans that come with a higher interest rate. A debt consolidation loan could significantly reduce the total interest you pay and make budgeting far easier.
Negotiating Lower Rates or Switching Products
If you don’t want to consolidate, then you might look to other methods of reducing your debts. These might include switching to cheaper forms of finance, or even simply asking a credit card provider for a lower rate. Often, it’s in the interest of a creditor to negotiate – since they don’t want you to fail to make your payments, either!
