New Year Tips to Tackle Your Credit Card Debt

It’s the new year so its time to get of your credit card debt for good and stop carring balances from month to month. If you want to become debt free then you will need to have a plan in place and be ready to be disciplined with your finances.

credit card debt

Here are some new year tips to tackle your credit card debt and become debt free.

Put It All on One Plastic

If you have multiple credit cards and you are carrying debt on all of these then one thing that you can do is consolidate the credit card debt.

You are able to consolidate in a few ways, but the best option would be to find a credit card that has a 0% interest rate for a certain period of time. The payment that you make each month will then go towards the principal amount and not the interest. Also, moving your credit card debt to one card will allow you to pay just one monthly repayment instead of having to juggle multiple payments and interest rates.

Keep in mind with these type of cards that the 0% interest period will end and once it has you will start to pay interest. This will only really work if you are able to clear your debt before the promotional period ends.

Another option that you can consider is taking a personal loan to consolidate your credit card debt with. Personal loans usually have a lower interest rate and you will just have one lender and one repayment to make each month.

Tackle the Highest Interest First

If taking on a new credit card isn’t right for you then you do have other options. One strategy that many people use is to focus on the credit card that has the highest interest rate first. This method is called the debt avalanche method.

With this method, list all your credit cards on a piece of paper, in order of highest interest to the lowest. Each month make the budgeted repayment towards the highest interest card and the minimum payment on the others. Your repayment on the highest interest rate card should be more than the minimum and an amount that you are able to afford in your budget. Once the card with the highest interest rate is paid off, you can move onto the next card and so on. This will help you to limit the amount that you are paying in interest each month.

Start Small

Another method is the opposite of the above and is called the debt snowball method. With this method, you will focus on the card that has the lowest balance first, so list all your cards from the lowest to the highest.

The idea here is to pay off credit card debt whilst maintaining momentum with small victories when a card is paid down.

However, if you use this method, you will be paying more in interest compared to the debt avalanche method, but many find this tactic motivating.

There are still more tips below, so keep reading to find out more…

credit card debt

Can You Get a Lower Rate?

If you have had your credit card for a long period of time, then it could be an idea to call your card issuer and see if you are able to get a lower rate.

Credit card companies are sometimes willing to work with you, especially if you have a track record of making timely repayments and have a good credit score. You can ask them to reduce your rate based on your past history.

You could also negotiate with your credit card issuer by showing them a competitors offer. If you find an offer that has a lower interest rate, then you can use this for negotiation.

How Did You Get Here?

Not only do you need to pay off your credit card debt, you also need to understand how you got into debt so that you can avoid being in the same position again in the future.

You will need to analyse your spending habits and behaviours that got you into debt and start making changes Credit cards can be valuable tools, but only when they are used correctly.

Can You Really Afford That? 

Many of us will find ourselves in credit card debt because we didn’t stop and think about what we are buying. Before you make any purchases you need to take a step back and think if you are really able to afford it. If not, then you should be rethinking the purchase.

credit card debt

Never Miss a Payment

It is never a good idea to skip a credit card payment as this can be harmful to your credit score and you will just drive yourself further into debt because instead of having just the one payment to make, you will now have two and a possible late fee.

Know the Signs

You are able to avoid credit card debt in the future when you know the signs. One big sign is that you end up using your credit card for necessities like food, rent and clothing. Other signs include missing payments on one card so you can pay another, ignoring credit card statements and so on. These are signs that you are heading down the wrong path and you will need to take a step back and evaluate where you are financially.

As the new year unfolds tackling your credit card debt should be a priority and once your debt is paid off, you need to avoid heading down that road again.

Avoid Overspending this Holiday Season

Many of us have the tendency to overspend during the festive season, because we feel that this is the time to reward ourselves by buying unnecessary luxury items. On top of this many online and physical stores run sales during this period to further tempt us into making impulse purchases. This can lead to further overspending and debt.

christmas money

However, when the year hits January again, all the negative effects of the spending start to catch up with credit card debt, more stress and regret.

Here are ways that you can avoid overspending this holiday season.

Know What You Going to Spend

Before you start planning your holiday shopping, you should have an idea of the amount of money that you want to spend. You need to go through the various categories of holiday spending like gifts, travel, decorations, food and so on. Your budget should then be divided between these categories and if you find that you are short then you may need to make sacrifices.

Trickery at Retail Stores

Even though you may have a budget and you are determined to stick to it, many of us still end up overspending. One of the main reasons that this happens is because retail stores are excellent at getting us to hand over our money.

They do this through loyalty cards, incentives to return to the store, retail credit, constant sales and other such tricks that get us to part with our money. You need to watch out for these and really think about if you need something or you just want it because it is on sale.

Give Yourself a Gift but Keep it Limited

A holiday trend that has appeared over the last few years in self gifting, which is where we treat ourselves to presents when we are out shopping for others. There is nothing wrong with buying yourself a treat, but you need to make sure you limit this so that you can avoid overspending.

Wait…we have some more tips for you below…

christmas debt

Don’t Pay for Convenience 

The holiday season comes with hidden costs and some of these take the form of convenience costs. Our usual routine goes out the window with the holidays and there are more things to do and responsibilities, which means that we often end up paying the premium for convenience.

It may seem easier to order takeaway or to stop at a convenience store to pick up a few groceries, even though we know they are more expensive than a supermarket.

Also, with more time spent shopping it leads to unnecessary purchases like coffees, bites to eat and more. These costs may seem small, but they can quickly add up.

Are You Cutting Down on Gifts?

If you are cutting down on the number of gifts that you will be giving this year, then you need to already create this expectation. For instance, if you usually buy your kids a whole bunch of gifts, but are cutting down to just 3 gifts this year then you need to speak with them and make sure they understand.

christmas spending

Also, if you will be making changes to your gift giving for extended family then you should let them know. You may find they also want to change how they give gifts.

Can You Travel for Less? 

If you need to travel to be with family over Christmas, then it can be expensive. However, you need to look for ways that you can save. You can shop around for the best flight deal, see if other travel dates are cheaper, pack on the go meals instead of being drawn to fast foods and so on.

Track Every Expense 

You will need to keep track of your spending daily and it is essential if you wish to avoid overspending during the holiday season. You need to stick to your budget.

The holiday season means extra shopping, so it is vital that you track your spending during the month of December. All you need is a pen and some paper where at the end of each day, you record the items that you spent money on during the day. You will then need to compare this to the budget you created.

It is not easy to avoid overspending during the holiday season, but with a little extra effort, it can be done. And by the time January rolls around, you will be thanking yourself.

Reasons Your Budget Might Not Be Working

Having and using a budget is necessary if you want to pay off your debt and to live within your means. However, many of us find that our budgets just don’t work because we find that the numbers don’t match up or that we always manage to spend more than what we budgeted for. There is a number of reasons as to why your budget might not work, which we will take a look at and how you are able to get your budget back on track.


This will help you with any debt that you are trying to pay off or just give you better management over your money.

Reasons Your Budget Might Not Be Working

Budgets Take Time

Your budget will not just automatically work and it can take a few months as you start to adjust to your new budget with your actual income and expenses. You need to give it time as you change your living habits to fall in line with your budget. You should carry on working with it and adjust your budget as you need to.

Spending More Than You Earn

If your net income minus your expenses is a negative number, then you are spending more money then you have coming in. The problem is then not the budget, but your spending. You will need to go through your budget, see what you spend your money on and make cutbacks.

This can be difficult to do, but in order to be in a better financial situation, you will need to learn how to live within your means.

Some Things Cost More

It is easy to underestimate how much you will spend on certain things like food and petrol. If you find that you are always overspending in these areas, then you will need to increase your budget in these areas. This might mean that you will need to make cutbacks in other areas.

It Only Works If You Use It

If you want your budget to work, then you will need to use it. There is no point in creating a budget, putting it away and then forgetting about it. Throughout the month, you should refer to your budget, track your spending and compare it to what you have budgeted for, so you can see how you are doing.

Wait…keep reading…there are more reasons why your budget might not work…

What About Fun?

Just because you are on a budget, it doesn’t mean that you can’t have fun. If there are certain things that you love to do, then just make sure you have applied a specific amount to these in your budget. Your budget should be reasonable, so you can still have fun but without blowing your budget.

stick to your budget

Change It, Adjust It and It Will Work

Your budget isn’t set in stone. You should actually adjust your budget every now and then. If your income and expenses change then your budget will need to reflect this. Also, major life changes like marriage, having a child etc., will also require changes to your budget.

Practice Discipline 

When you are sticking to a budget, unplanned purchases may require you to say no. You may have to put a purchase off, until you have checked your budget to see if you are able to afford it. You are able to delay some purchases until you have saved up for them.

Cheating On Your Budget?

It is possible to cheat on your budget by saying you earn more than you actually do or you say that you spend less than what you really do. Not sticking to your budget and not being truthful can have consequences like more debt or you may find that you have to go into your savings to pay for your regular bills.

Every Expense Counts

If you do not include every expense into your budget, then it may seem that it is not working when you compare your spending to your income. You need to capture every expense that you have. You can track them via online banking, ATM receipts etc.

Are All Bills Monthly?

There are some bills that are only due once a year. If you don’t include these in your budget, then they will take you by surprise. The best thing to do is to determine the monthly amount for these yearly expenses and put money away for these during the year, so that you don’t get a shock and blow your budget.

An Emergency Fund Is A Must

Having an emergency fund is a must as this will stop you from having to pay out of pocket for unexpected expenses. You can start an emergency fund by putting some money away each month until you have reached at least 3 to 6 months of your living expenses.

Budgeting only works when you are truthful, keep a record of all your expenses, make cutbacks when you need to and adjust as you go through the month. This will help you to live within your means, but can also help with debt that you need to pay.

Top Reasons to Pay Off Your Debt

You may have a plan to pay off your debt, but without any real motivation behind it, these plans can fall flat. You could start out feeling motivated to be debt free, but this can easily become undone due to the time and effort it takes to see your plan through.

debt free

If you want to stay motivated to being debt free then you need to continuously remind yourself of why you want to get out of debt. Here are the top reasons why you should want to be debt free.

Have a Better Financial Security

Your financial security is threatened by debt as it stops you from making the most of your money. The money that you are paying for debt payments could be saved and used for your retirement, your kids or just a rainy day. As soon as you become debt free, you will be able to work your money for you and become financially secure.

Stress Buster

Having debt can easily lead to more stress as you are constantly worrying about how you will be able to cover all the debt repayments you have as well as your other living expenses. Constant stress can lead to health issues like migraines and even heart attacks. Taking the steps to become debt free can reduce your stress and you will feel better about your financial circumstances.

Have Less Bills to Pay

You will have more bills to keep up with when you owe more people money. As soon as you become debt free, you will have fewer bills to worry about and manage.

You will then only have the normal things to worry about like your insurance, utilities, phone bills and other such things. These are expenses that are part of life, which don’t have minimum payments, interest charges and long term obligations.

Wait…here are more top reasons to keep you motivated to pay off debt…

Your Credit Score Gets a Boost

When you have too much debt, especially credit card debt, your credit score will be impacted negatively. Your credit score will take a hit when the balance you carry on your credit cards is high in relation to your limit.

This is also true when your loan balances are high when compared to the amount that you borrowed. Your credit score can improve when you become debt free.

Teach Your Children

When it comes to money and managing your finances, it is always best to lead by example. You can teach your children the importance of being debt free and show them by becoming debt free yourself. This will teach them valuable lessons for the future and they will know how to avoid debt and what it means to be debt free.

Spend Your Money On The Things You Like…Guilt Free

When you are paying money on debt, you will have less money to spend on the things that you really like to do in life.

debt pay off plan

This is actually one of the main reasons that people end up going further into debt. This is because they are not able to afford to buy the things they want due to the debt they have, so they end up using more debt to make these purchases.

When you pay off your debt this cycle ends and you are able to free up your money so you can buy the things that you really enjoy.

Own Your Assets

If you have a mortgage then the bank owns your home and not you, which is also true for your car if you used a loan to purchase it. When you are debt free, you will own your house, your car and the clothes that you wear.

You will not need to worry about someone taking your possessions because you were not able to afford the payments.

Future Earnings

When you take a loan or use your credit card, you are borrowing from your future income. So whatever you spend today, will be taken from your future earnings.

Debt will decrease your future standard of living as you will have less money to live on then what you have today.

In order to make the most of your income, you will need to become debt free.

Make Your Own Decisions

For as long as you have debt, your lenders will make decisions about your money and not you. Your lenders will decide how much you will pay them and when you pay them.

They are even able to increase your interest rate and your minimum payment. When you pay off your debt, you regain control over your money.

Paying off your debt is important and it may take a while to do this, especially if you have multiple debts with multiple lenders. If you are struggling with debt, you can consider a debt consolidation loan as this might make paying off your debt easier to manage. There are a number of reasons as to why you will want to become debt free and you should strive towards this.


Red Flags That Could Mean Doom for Your Money

Many people say that they feel surprised when their finances come undone, but there were warning flags that this was going to happen before you lose control.

financial trouble

If you are able to spot these red flags of impending financial trouble then you might be able to stop it before you end up in a bad financial situation. Here is a look at some of those warning signs that could spell financial trouble in the hopes that you can turn it around.

Your Credit Card Repayment Each Month is in High Triple Digits

If you are paying more than R1000 a month to cover your minimum monthly payment then you probably have too much credit card debt.

If you want to make progress on your balance and stop it from growing bigger then you need to pay well above the minimum amount that you owe. However, if you already owe so much on your credit card and you are struggling to pay the minimum then you may find it hard to get some extra cash. This means that your card balance could easily get out of control. If you are not able to afford more than the minimum then it could take years for you to pay off your balance.

You are Charging Groceries and Petrol and Not Paying It Off

People are using credit cards more and more instead of using cash and debit cards to pay for everyday essentials. This is essentially so that they are able to take advantage of credit card rewards.

However, if you are not paying these expenses off each month in full then it could be that your living expenses are more than your income and you don’t have a financial cushion for your regular expenses.

The use of credit cards for everyday purchases should only be undertaken if you are financially able to pay off the balance for these in full each month.

You Keep Going into Your Savings

If you are constantly going into your long-term savings in order to make ends meet or to pay for unexpected expenses then you may not have enough liquidity to truly pay for a financial emergency.

Ideally, you will want to have at least 3 to 6 months of living expenses saved in an emergency fund to cover an unexpected expense or a job loss. However, it’s a sign that your finances are in trouble if you find that you are using your emergency fund or other savings for expenses beyond your budget.

Don’t stop reading…more warning signs below…

You Often Pay Bank Fees

If you often end up paying for preventable bank fees like out of network ATM fees, late fees or overdraft fees then it could show that your finances are disorganised and are threatening your financial health.

Your Retirement Account Isn’t Growing

If you invest smartly and contribute regularly to your account, your retirement fund should grow significantly each year.

retirement fund

However, if you notice that your numbers aren’t really shifting then you may need to take another look at your investment strategy or you need to look at contributing more to account.

Your Income isn’t Growing

Your savings should be growing every year and so should the total amount that you take in. If your income is holding still then it could mean that you are not performing as well in your career or are not taking enough risks. Also, keep in mind that if your salary doesn’t at least keep pace with inflation then your salary is actually shrinking.

If you have noticed any of these things then you need to take a look at your finances and restructure your budget to fit with what your current financial situation is before things get any worse.

How You Can Live Within Your Means

Living within your means, means that you spend less or equal to the amount of money that you bring in each month. This is usually a lot easier said than done for many of us. This is because loans, credit cards, savings and even your emergency fund allow you to spend more on things that what your income would normally allow you to.

live within your means

However, this is not a sustainable lifestyle and eventually, your frivolous spending will catch up with you. Your savings and your access to lines of credit will run out and you will then have to make drastic changes or you could face financial ruin.

Here are some key steps to be able to live within your means and avoid racking up the debt.

What Do You Make?

The first thing that you will need to do in order to live within your means is to know what your means are. You will need to know what your net income is, which appears on your paycheck. Also, you need to know how often you get paid, is it every month, every week, every 2 weeks and so on. Most of your bills are paid monthly, so you will need to know what you get paid each month.

Once, you have determined what your means are each month, you will know exactly what you have to work with.

Spend Less

Now that you know how much you make, you will need to focus your efforts on reducing your spending so that it fits your income. Use a budget to plan your expenses as well as to keep track of your spending. If you have tried the budgeting tool before and it didn’t work for you, then you need to try it again. Often, you will just need to make some minor changes in order to get your budget to work.

You can also try a method called backwards budgeting, which is where you write down your income and then subtract each expense that you pay each month. If at the end you have a negative number then you are spending too much.

Give Your Income a Boost

If you have got your expenses down to the absolute minimum and you are still spending more than what you earn, then you need to look at ways you can boost your income.

Make sure that you are claiming any benefits that your employer offers and that you are signed up for the right health and disability benefits. You can consider changing jobs to a higher earning one or you can look at picking up a second job in order to make ends meet.

The fact is that you need to look at ways where you can make enough money each month to pay for all your necessary expenses.

Don’t stop reading there are still more ways you can learn to live within your means…

Avoid Relying On Credit

You need to stop relying on your credit cards to meet ends meet as this shows that you are not living within your means. In your budget, you need to leave out all your credit cards and loans as a way to make your expenses.

Any type of credit has to be paid back, so if you are relying on these then you will end up in a cycle of debt as you will pay your balance off, then reuse it to make your necessary expenses and so on. You need to stop the cycle and the debt and learn where you can make cutbacks and live with what you have.

Stop Keeping Up With the Joneses

You have to resist that pressure that you need to have the same material things as those that are around you, that you see on television or even on social media. You might be able to fake wealth through loans and credit cards, but this is only for a short period of time and you will end up paying for it later and you will be paying more.


Save Rather Than Credit

Many of us will use our credit cards to make large purchases that we are not able to afford straight away like a new TV. However, instead of using your credit card for these buys, rather put some money aside each month and once you have saved up enough you can buy the item without having to go into debt. If you are not able to put money aside to save then you can’t afford the item at all.

Have the Crucial Emergency Fund

When you have a savings account that is solely for emergencies, you will be able to pay for any financial emergency that may arise without having to use your credit cards. Your emergency fund should at least be 3 to 6 months of your living expenses, but even having a few thousand in the fund will help with some minor emergencies every now and then. Something is better than nothing.

Living within your means can be difficult, especially if you have relied on credit cards and loans in the past to pay for things, but this will just lead to financial issues later down the line. You may have to make difficult changes, but it is worth it as you will not be trapped in debt and you will become financially savvy.

How Does a Debt Consolidation Personal Loan Work?

A great solution to high interest debt is a debt consolidation personal loan. You are able to use these types of loans to pay off any type of debt that you may have, from unsecured loans to credit card debt. Even though a debt consolidation personal loan is a great finance management tool, it won’t be for everyone, so you will need to carefully consider this option and weigh up both the advantages and disadvantages before you take on this loan.

debt consolidation

What Exactly is a Debt Consolidation Personal Loan?

Debt consolidation is where multiple debts are taken and are made into just one. You are able to do this through personal loans, credit card balance transfers and mortgage loans. Money that you borrow for the purpose of paying off multiple debts is considered a debt consolidation loan as you will have one payment to make instead of several.

Specifically, a debt consolidation personal loan is a personal loan that is used to pay off debt. A personal loan can be applied for at a bank or an online lender. You will fill out an application form and your income, credit score etc. will be analysed before a personal loan is granted to you.

The benefit here is that a personal loan will usually have a lower interest rate than a credit card, but the interest rate will be higher than a car loan or mortgage because it is an unsecured loan. This means that there are no assets that can be repossessed by the lender if you fail to repay.

The Advantages of Debt Consolidation Personal Loans

There are a number of advantages to debt consolidation personal loans that you should take into account.

Firstly, you are able to use this type of loan to consolidate numerous payments into one, which will make your debt easier to manage and you are less likely to forget a payment which would incur late fees.

Secondly, you will be able to save money on interest as a personal loan generally has a lower interest rate, so transferring your high interest debts to this type of loan saves money.

Thirdly, your debt repayment will generally be lower than what you are currently paying with your existing debts.

Lastly, a personal loan will usually have a fixed payment and term, which means you will know exactly what you will need to pay and how long you will be paying the debt off for.

You might be wondering how and where you can get a debt consolidation personal loan from…

How to Get a Debt Consolidation Personal Loan

The first thing that you will need to do is to determine how much debt it is that you want to consolidate. You will need to add up all of your high interest debts that you want to be free from and gauge the amount that you owe. You are then able to apply for a consolidation loan for that amount.

However, applying doesn’t mean that you will get the loan as the lender will take into account various factors before granting the loan. You will usually need to have a decent credit and income in order to get a low interest rate loan, but you will find lenders that give personal loans to those with bad credit, but you will still need to have an adequate and steady income in order to get the loan.

If you are approved for the loan then you will receive the terms of the loan, which will include the amount that you will need to pay and for how long as well as the interest rate and fees.

Once you know how much the loan will cost you, you will need to compare it to the cost of paying off your debt without the loan. If you determine that you will save money by taking the debt consolidation personal loan then you can accept.

The lender will then issue you with the money that can then be used to pay off the debts. You will need to create a budget and avoid incurring debt again once you have paid off your debt.

Where to Apply

You are able to apply for a personal loan for debt consolidation at your local bank, but the approval criteria is pretty strict so you will need to have good credit and adequate income.

apply for a debt consolidation loan

If the bank is not an option for you then you can consider online lenders. There are a number of online lenders that offer personal loans that you can use how you like, including debt consolidation.

The approval process with many of these lenders is less strict than a bank and they offer faster approval. With online lenders, you will generally only need to fill out an online form and may need to email or fax certain documents like your payslip as a proof of income.

Once, the online lender is sure that you can pay the loan back they will transfer the money to your bank account. There are even online lenders that will not run a credit check on you and will only look at your ability to pay the loan back.

If you are still struggling, you can seek the help of a debt counsellor that will help in managing your debt with you, by creating a budget and a debt management plan, where you can start paying off your debts.

A debt consolidation personal loan is not for everyone, but it is a viable option for those that are struggling with multiple high interest rate debts as you will be able to pay these off and only pay for the personal loan that will have a lower interest rate and monthly repayment. It is important not to incur any other debt during the process and to ensure that you are able to afford the debt consolidation personal loan and that it is cheaper than what you are paying currently.

Choosing Between Debt Consolidation and a Balance Transfer

It is never easy to pay off debt, but your load can be lightened when you have smaller payments and a lower interest rate.

With common debts like personal loans and credit cards, two ways that you are able to lower your rate is by debt consolidation loans and balance transfers.

So, what is the difference between these two and which one is the best route to go down? Both debt consolidation loans and balance transfers have advantages and disadvantages, so you will need to make an informed decision and understand the fees, your debt and everything else before you dive into one of these options.

Let’s take a closer look at both of these options.

Balance Transfers with Credit Cards

A credit card balance transfer is where you transfer your debt to an existing or new credit card. This can be an attractive option if you know that you are able to pay your debt off quickly.

credit card balance transfer

The idea is to move the debt to a card that has a lower interest rate or what would be better is it offers a 0% interest rate on your debt for a certain amount of time. When you are able to eliminate the interest, your loan balance will stop growing and every cent of every payment that you make goes directly to reducing your debt. However, you must read the fine print.

You will need to find out if you will need to pay a fee to transfer balances. These costs can be a percentage of the amount that you transfer or they might charge you a flat rate which can be more. Any savings that you are able to make with a lower interest rate need to more than cover any transfer fee. Also, if you open a new credit card, you might be also taking on a new annual fee.

When it comes to interest rate those that have good credit will be offered the best interest rates. If you see tempting offers then you will need to do your research and see what the card issuer will actually offer you once they have reviewed your credit. If you find a 0% APR card then you need to check the small print and find out how long the offer lasts. You need to check when the rate will change and what happens once the promotional period ends.

Balance transfers can be tricky because they are not really bad for your credit, but they can cause problems. This is because every time you apply for a new card, lenders will look at your credit history and any enquiry will put a dent in your credit. Your credit score can also be lowered by having too many consumer accounts like credit cards open. If you are going to use a credit card to transfer balances then you need to make sure that you use it as a debt pay off tool and not a way to increase your debt. You need to avoid using the card that you have paid off as this will just drive you deeper into debt.

So…what about debt consolidation? Keep reading to find out more…

Using Debt Consolidation

An alternative option to using credit cards is to use a personal loan for debt consolidation. If you are able to get a large enough loan then you may be able to combine several loans into one so that everything is one place. Debt consolidation loans usually come with a fixed interest rate, which can make more sense when credit card promotional periods are too short for you to pay back all the debt.

debt consolidation

You may pay upfront fees for debt consolidation, but you also may not. There are some loans where the costs are obvious and include things like processing or origination fees. With other loans, the costs may seem invisible but these are actually built into the interest rate.

You will then need to compare multiple loan offers so that you can find a combination of fees and interest charges that will benefit you.

When it comes to the interest rate charged on a debt consolidation loan it will depend on the type of loan that you use. A personal loan that is unsecured will have a higher interest rate than a secured loan, for instance. However, you will still most likely pay an interest rate that is lower than your credit card.

If you believe that your debt will take several years to pay off then you will probably benefit from a debt consolidation loan. You will find both variable and fixed interest rates for these loans. Fixed rates make it easier for you to plan and budget as you will know exactly what your monthly payments will be for the term of the loan.

New loans also create enquiries like credit cards, which can then impact your credit score in the short term. In the long term though some debt consolidation loans could be better for your credit then balance transfers.

Generally, your credit score will be higher when you have a mixture of different types of credit and instalment loans as you look more attractive than a borrower who relies mainly on credit cards. If you are a heavy credit card user then it may appear that you are spending beyond your means and this is not sustainable.

Taking a debt consolidation loan can show that you have made a commitment to paying down your debt and that you have used the right type of debt for that purpose, which translates into you being a savvy borrower, that can show that you are likely to repay other loans in the future. Your credit will strengthen when you make payments on time and only take on debts that you are able to afford.

You might be wondering about how collateral works…

What About Collateral

There are some debt consolidation loans where you will need to pledge collateral, which means you give the bank or lender permission to take your assets and sell them if you fail to repay the loan.

Pledging collateral can help you to get approved, but it is also risky. If things don’t go to plan you could lose your home or your car. You should keep unsecured loans, unsecured as you will only be risking your credit.

If you use a home equity loan, for instance, to pay off an unsecured credit card debt, your risk dramatically increases, because if something you hadn’t planned on happens then you could lose your home.


If you already have debt that is secured by collateral, you can consider refinancing these loans separately. You can use a balance transfer or debt consolidation for unsecured debts and get a different loan for your secured debts. However, you are able to turn your secured debts into unsecured debts by paying off your secured debts with an unsecured loan, for instance, which will reduce your risk, but you need to make sure that it is worth any additional costs.

Using a balance transfer can work if you are able to pay off your debt quickly, but a debt consolidation loan will make more sense if you believe that it will take you years to pay off your debt. With both of these, you will be moving all your debt into one so that you have one monthly repayment to make and only one interest rate to manage, which can help with your cash flow. You just need to avoid creating more debt so that you can become debt free.

Budget Hacks to Make Your Life Easier

You can exercise more control over your finances by having a working budget. A budget is a great tool to have to gain control over your finances and turn your situation around. There are many people that believe budgets don’t work as they take too much time or they keep making mistakes. Budgets do take work, especially in the first few months because you will need to adjust to your new spending habits. However, here are some budget hacks that will make sticking to your budget much easier.


Use Cash for Problem Categories

If you don’t really like tracking your budget each day then you may want to think about switching to cash for categories where you usually go over. Common areas are entertainment costs, groceries and clothing.

It’s a good idea to take the money you have budgeted for these categories out of the bank at the beginning of the month and divide the cash into envelopes for the various categories. Once the cash has run out then you know you need to stop spending. Keep the receipts so you know what you have spent the cash on. With groceries, you can divide the cash further like have an envelope for each week of groceries and this way you won’t be running out of food in the last week of the month.

This will also make you more aware of how you are spending your money as cash is a lot harder to separate from than just swiping your card.

Use Your Phone for Budgets

It is much easier to stick to a budget with budgeting software. You are able to download budgeting software to your smartphone, which means you are able to enter transactions as you go. The software usually allows you to create a category and assign a certain amount to each of these. Once you enter the transaction into the appropriate category, it will tell you how much you have left in the category.

This can help you to avoid mistakes and if you are married and are both spending money in the same category then you can keep track a lot easier. Entering transactions as you do them will help you to save time.

Wait…There are more budget hacks to know…

Sit Down and Review

A great way to get your budget working is to have meetings about it and this is a necessity if you are married. This is where you look at your spending habits and review the changes you can make. You should do this at least once a week. These reviews only take a few minutes to do but at first, they may feel like a chore, but it is worth it. Also, your weekly review will take less and less time as you get better at budgeting. You need to know where your money is going and how much you have left each month.

Making the Cuts

If your budget shows that you don’t actually have enough money to cover all your expenses then it’s time to determine where you can make the cutbacks. Finding extra money by making cuts can make a huge difference.

You can shop for a new cell phone plan, internet provider and insurance, but you can even save by just doing simple things like turning off lights in a room you are not using, stop buying that morning takeaway coffee, think before you buy clothing and make sure you don’t have something similar that is lurking in the back of your cupboard and other such things as they will save you a bit of money. Making cutbacks or finding ways to reduce your bills and spending can make sticking to your budget easier.

Save on Groceries

One of the major problem categories for people is groceries and many of us overspend in this area. Fast food and eating out is easier, but this will soon add up. A trap that many of us fall into is buying our monthly groceries but then still getting take away and eating out too often, so we are just spending more. Cooking food yourself is definitely cheaper and you will save money, but it can be difficult to save on your food budget.

food budget

One hack that you might need to save on your grocery bill is a menu planning service. These type of services will put together a list and provide you with new recipes each week. This can help you to stop eating out and wasting food.

Also, when you are going shopping look for specials and discounts on products that you use even if it’s not the brand that you use, because these small savings can add up. Take a little time to compare products and prices so you can save.

Sticking to a budget can be difficult and many of us are prone to impulse buys, but if we just take a moment to think about the purchase and how it would affect our money we will think twice. You can make life easier with a budget and by using the hacks above.

5 Tips for Staying Debt Free

Not only do you want to become debt free, you will also want to stay debt free in the long term. You will need to adjust your spending habits and only learn to live within your means so that you can get out of debt and stay out of debt.

debt free

Here are 5 tips for staying debt free

Use Cash

When you use cash to pay for things it forces you to only spend the money that you have and if you don’t have the cash then you can’t afford it. Credit cards should only be used when you are 100% sure you can pay it back in full each month. If you are not able to control your credit card spending then you should get rid of them.

The Power of Negotiation

You do have the right to negotiate, but not many people are aware of this. You should shop around for the best deals and you will find that prices are competitive. Suppliers will not just match their competitors offers they can better them. So ask for a better deal than what is on offer and see what you can save.

Get Your Free Credit Report

You are allowed to get one free credit report each year. This report will show you how often you have applied for credit, the amount of debt you are in and you will be able to see if there are any mistakes or if there has been any fraudulent activity. Your credit report is useful because you will get a better understanding of your finances and see where you will be able to improve.

Paying Your Creditors

You will need to keep up to date with your monthly payments to creditors, which includes your credit cards, utility bills, store cards and other financial obligations that you may have. If you start to fall behind on these payments, it can be hard to catch up. You should have at least three months of your salary saved for any unforeseen occurrences, emergencies or if you lose your job.

Face Your Debt

If you have uncontrollable debts, then you can’t hide from them in the hopes they will disappear. You need to face your debt and you can seek advice from a debt counsellor. They will be able to help you find the best way to pay off your debt.

In order to be debt free, you will first need to tackle your current debts and become wiser about how you spend your money, like by shopping for deals or determining if you really do need a particular item. Once, you have cleared your debts stick to your budget and continue to be debt free.