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Many of us like to do a bit of spring cleaning around our house and tidy things up generally but not enough of us tend to take the same approach when it comes to our finances. A spot of financial housekeeping and a general review of our finances would be beneficial in a number of ways and it could help you to reduce your debt and lower the cost of your borrowing as well
Here is a look at some ways that you might be able to reduce or even erase your debt more efficiently and how you might be able to enjoy a lower finance rate on any loans than you current pay at the moment.
Savings
Most of us would like to have a safety-net or comfort-zone when it comes to our finances and that often means trying to have a bit of money put aside in savings so that you can cope with some short-term financial emergencies and have something to fall back on when you need it.
The question that you need to ask yourself is are you paying more for your borrowing than you are earning on your savings? It is generally the case that you will rarely be able to earn more on your savings than you will be paying in interest on your borrowings so it does make financial sense if you are able to pay off your debts before you start to save.
Once you have lowered your debts you will be in a position to save more but it would be prudent to make sure that you have a sum of money set aside as emergency funds because it would be expensive to have to borrow money in a hurry for a short-term and could end up wiping out the cost-savings you have achieved previously.
Switching loans
Not all of us are in a strong enough financial position to be able to pay off our debts in full from savings and therefore it makes sense to see if you can lower the total cost of your borrowing as a way of saving money.
Personal loan rates are very competitive at the moment and lenders like Clydesdale Bank have recently announced their lowest ever rate for personal loans at 4.7% APR, so you could see if there is an opportunity to pay off your existing loans if they are more expensive by calculating the amount that you are paying in interest at the moment compared to how much you pay with a lower APR.
We are in a new financial climate these days and affordability is a key issue with the majority of lenders which means that you have to be able to demonstrate your ability to manage your finances and show that you can comfortably afford the repayments based on your current circumstances.
It would make sense to set out a budget of your monthly expenditure before you apply for any finance and you could use this information to see whether there are some debts that you could get rid of or do without.
A bit of regular financial housekeeping is always a good idea and it could help you to lower the cost of your loans.
Jamie Benson has a passion for personal financial health. She uses her financial counselor experience to keep people informed of how to make wise money decisions to reach their goals.
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