If you are in debt you may be looking at all the usual ways to reduce it and put your finances back in order. There are however some ways that are not usually considered but can be just as effective, if not more so.
Consolidating your debts is nothing new; people have been doing it for years. The idea is that you have one new loan to cover all your debts so that you have a smaller, more manageable monthly payment. This works because the worst debt most people have is credit cards, and their interest rates are far too high. They usually quote you a monthly figure of perhaps 2%, which does not sound too bad. Turn that into an annual interest rate though and it far exceeds 20% and that not good at all.
On the other hand, for a loan, you would expect to pay interest of anywhere between 8% and 18%, depending on the amount you borrow and the period you repay it over. Loans for people with a bad credit history, such as those available from Bonsai Finance, are still a lot better than credit card interest rates, and these days there is no shortage of them available.
Here comes the advice that is a bit different though, borrow more than you need. This seems to go against the grain when you are trying to get out of debt, but the more you borrow the lower interest rate you will pay, and there can be s significant difference.
For instance, using average figures, borrow £1999 and pay interest of 18.5%. Borrow £2000 and that drops to 14.9%. Another example is to borrow £2999 and pay interest of 14.9%. Borrow £3000 and pay just £7.8%.
This equates to a loan of £2999 costing you £70 a month for 5 years, and means in total you repay £4270. A loan of £3000 over the same period will cost you £60 a month with a total being repaid of £3630. This is an extreme example but will have cost you £640 less. Before you take out a loan, look to see how much you would have to increase it by to get a better deal. It could save you some money.
Reduce Your Motor Insurance
The more you can reduce your outgoings the more money you will have to reduce your debts. Reducing your motor insurance is one way of doing this. You would think that the more people you insure to drive your car the more expensive it would be. That is not always the case. Try adding your spouse, or your mom and your premiums can come down.
This might not make sense, but it works. Different insurers have different views about who will reduce the premium so you might have to shop around, but the saving can be quite a large amount.
Watch the job description you give to your motor insurer as well. Because job titles are often specific, there are many that are not listed by them so it’s often a case of the nearest fit. This can cost you money, and changing your job description slightly can save you money. For Instance, the difference between the motor insurance for a creative director and a marketing manager can be more than £200, but they both do the same work.
It is also worth considering changing the insurance company you use. You do not get a better deal for being a loyal customer. In fact, the opposite is true. The best deals are reserved for new customers. The insurers are all fighting for your business, and it could be that if you tell your current company that you have been offered a better deal, they will either match it or beat it, but without that threat, you will pay more by staying with the same insurer.
Change The Way You Shop
Getting out of debt is all about saving money where you can to use to pay the debts off, and to stop the problem reoccurring. One of the largest bills in any household is food, and there are lots of ways you can save on this.
Don’t be a snob about your purchases. When goods are the supermarkets own brands they are often made by the same companies that make the well-known products, and to the same standards too. The difference is they are usually quite a bit cheaper and you can reduce your shopping bill by using own brand goods.
One of the most expensive items for any household is meat, and you can create a significant drop in your food bill if you reduce the amount you use. For instance, a vegetable lasagne can be just as tasty as one with meat in and is probably healthier. Buy cheaper cuts of meat if you really must use it. They will be fine if you cook them a little slower, and in fact, sometimes they are tastier.
If you want frozen vegetables, buy them fresh and freeze them yourself. All you need to do is cut them up and for greens, boil them for just two minutes then freeze. Carrots and other root vegetables you just prepare and freeze.
With a bit of forethought and planning, you can make and freeze meals yourself. They will be cheaper than buying the highly processed ones from the supermarket, and without a doubt will be better for you. Things like shepherds pies, casseroles and any sort of pie with pastry will all freeze well and will save you a fortune on your shopping bill. You control what goes in them, and that is a huge advantage.
A Dream Of No Debt
We would all love to be in a position of no debt, but for people who have a lot of it, it probably feels like a far-off dream. The only way is to have a plan, to save money wherever you can and do not expect it all to disappear overnight. That will only lead to disappointment and might make you give up on your efforts to get debt-free.