Interest

5 Reasons to Use Debt Consolidation Loans

A few maxed out credit cards, a personal loan that’s accumulating a lot of interest, and suddenly you’re feeling swamped with financial problems. Believe me, it has happened to the best of people, when at one point in our lives, most of us have faced financial hardships.

But you have to come to terms with the situation, stay calm, and focus on how to come out of the mess. We look at five ways debt consolidation loans can help you financially and allow you to get back in control of your money.

1. Lower interest rate

Typically, a credit card loan is calculated at an interest rate which may be anywhere between 12.5% to 23% per annum; while a debt consolidation loan may charge 8.5% to 18.99% in interest, depending on fixed or variable interest rate. But remember that a lower interest rate on a higher principle amount can result in you paying a lot more over the long term.

2. Improves credit rating

If you’ve opted to take a debt consolidation loan, rest assured that payment of all your assorted loans on time will improve your credit rating in the eyes of the financial institutions, making you eligible for future loans or mortgages, should the need arise.

3. One regular payment schedule

Consolidated debt means one single payment every month, instead of numerous payments to be made to various financial institutions. Suddenly making repayments becomes a smooth, quick process, without you having to get stressed managing all the loan repayments spaced over the month.

4. Reduce debt processing fees

Sick of those late payment fees? A debt consolidation loan will work towards lowering your processing charges for each loan or mortgage you owe. But this will only work if you do your homework, and compare the pros and cons of each loan versus others you have already started. So do your research carefully.

5. Control of finances

A conscious decision to go for a consolidated loan will bring you a feeling of control of your finances, as you will be forced to look at your spending habits and take stock. Also Equated Monthly Instalments (EMI) on your loan will take away a chunk of your income every month, forcing you to take charge of your finances once again. But this is a good thing!

Check your bank’s website for an online debt consolidation calculator, do plenty of research and speak to your bank or a financial expert before choosing a debt consolidation loan.

July 26, 2013

Where Should my Savings Go?

From Get That Home Deposit by Peter Cerexhe.No, no, no! If there is one thing I can say to you with absolute passion, with almost violent intensity it is this: don?t leave your savings in your everyday bank account. The money will disappear as though taken by magic.

There are a number of mystical money rules:

  • When you put your car in for repairs the bill will always be more than the quote.
  • When the bank says its fees won?t be going up it will find other ways to charge you.
  • When your son or daughter says ?All I need is $50? it will not be all they need.
  • Junk food costs more than good food and takes longer to get.
  • When a restaurant bill is divided in equal proportions around the table, you will end up paying more than you ate.

And of particular relevance here:

  • Your bank account does not build savings, it devours them.

When I say ?bank? I?m really including most financial institutions, not just banks. And I?m not blaming them. These everyday transaction accounts give you, the customer, great freedom of action while keeping your money safe from robbers or from simply falling down the back of the couch. You can ask for your money at any time. Just go to an automatic teller or the branch; log on at the institution?s website or use phone banking to pay the bills and transfer money. Such freedom of access comes at a cost. I don?t expect an everyday bank account to actually make money for me.

And you can forget about the interest they pay you on your savings – it is almost nothing at present. Placing money in a daily banking account is not ?saving? it. It is the first step towards losing it.

In all probability the money will be spent on worthwhile, even important things like paying household bills or buying the heater you need with winter coming on.

I can see a worthwhile purchase every time I cross a shop floor. Indeed there have been many times when I have bought things at such great discounts that I have saved literally hundreds of dollars through astute shopping. But I?ve nearly gone broke saving money like this. A dollar spent is a dollar gone. Forever.

When I put money into my bank account I know I must get it out and invest it somewhere else fast or it will disappear.

From Get That Home Deposit by Peter Cerexhe ($19.95, Allen & Unwin).

Get That Home Deposit is a practical guide to raising a deposit to buy your own home in 2 years. Your own home. Has a nice ring to it, doesn’t it? Think how great it would be to come home to your own place at the end of the day and know that it’s yours.

If you’re after some sure-fire tips for reducing spending, and more importantly – increasing savings – don’t miss Get That Home Deposit.

Buy this book from the SheSaid Bookshop.

March 25, 2003