If you have done any budgeting you may have found that a significant amount of your income is taken up by interest and other charges on debts.
Pay off your high interest rate debts as quickly as possible to reduce the amount of interest you have to pay.
If you have a lot of debts, you could look into increasing your mortgage or consolidating the debts into one loan. This loan should only be from a bank, credit union or building society as their interest rates and charges can be as little as one quarter of those of other lenders. Avoid those who advertise that they can help you with your debts as they charge very high fees.
Make every effort to avoid taking out a high interest loan from a loan company. You could end up paying several times the original amount borrowed and if you cannot keep up payments you could have your most valuable possessions seized.
If you are having difficulty meeting mortgage payments you could change to an interest only mortgage. This would reduce your payments until you are in a position to resume paying both interest and principal.
Paying off a mortgage as quickly as possible can save thousands of dollars in interest. Do not get involved with those who offer to help reduce the total interest you pay. They charge a fee of thousands of dollars for information which your bank can provide free of charge.
Do not start investing money until you have paid off a mortgage. The reason for this is that the percentage rate of return you receive on an investment, after tax is deducted, is normally lower than the percentage interest rate you pay on your mortgage.
Before taking out a student loan, make sure that there is a good chance that you will be able to get a job at the end of the course. Only spend student loan money on essentials because having a big loan could create a lot of problems for you in future.
If you own things that you have no further use for you should try selling them. In the case of high value items that are rarely used, you may be better off selling and using the money for repaying debt.
If you cannot manage to meet repayments on your home or car you should consider selling and buying something cheaper. When selling or buying a house or car it may be difficult to work out their market value but you should make a big effort to do this as you could otherwise sell too cheaply or pay too much.
Stop buying on credit, as you can end up paying two or three times the purchase price in interest and other charges. You could also miss out on any cash discount.
Cut up your credit cards, as you could be tempted to buy on impulse and end up with a larger and larger debt on which you have to pay extremely high interest. Using a debit card (EFTPOS) for larger transactions is a better alternative because you can only use the card if you have money in the bank. You pay a fee for each transaction so use cash for smaller items.
If you need help managing debts, assistance can be provided by a budgeting service. Look up the Yellow Pages or go online and when you make contact with an organisation make sure that they provide a free debt management service using volunteers.
Refer to the Useful Websites section for further information on the above.
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