In 2007, the Australian Investment and Financial Services Association found that the average household owed A$160 for every A$100 of income. In short, people were spending more than they earned.
While being in debt is all part of life these days, problems do crop up when loans come from multiple sources with high interest rates. Here are some ways to reduce family debts.
Find the Best Loan
With so many loans offered by banks and finance companies these days, finding the best product does need some research. Whether it’s a home loan, car loan or credit card, be sure to choose a product with a low interest rate as well as low fee. Some banks offer very low interest rates only to make them up with higher fees. Watch out for these. Read all fine prints carefully and thoroughly before deciding on a loan.
There are easy ways to compare loans these days too. In Australia, websites like RateCity and InfoChoice allow users to compare loans, credit cards and bank accounts quickly and conveniently.
Refinance Loans
Stuck with the wrong home loan? It’s never too late to refinance it. But first, find out what product suits you most first. Again, some research will be required. Make sure the decision to refinance will not cost you even more in the long reun. Read through terms and conditions and check for hidden fees.
Consolidate Credit Card Debts
It’s hard to manage money and debt when there are too many credit cards in the wallet. With more bills to pay, keeping track of them can be a real challenge. Also, the amounts accumulated on all the different credit cards would become due for payment within a few days or weeks of one another, giving the credit card holder little time to repay all the bills on time. The resulting higher interest rates can cause unmanageable debts. A good way to relieve credit card debts is by consolidating them into one card.
Minimize Loans
Obviously, the less a person borrows, the less interest he has to repay. So it’s best to save up more and pay a bigger deposit before applying for a loan to buy a house or a car. While it’s possible to get a full loan for a car, the borrower will end up paying a lot more for the interest than another borrower who has put a big deposit for the car. Another way to reduce debt is to reduce the credit card limit. With a smaller credit limit, the likelihood to spend and owe more is reduced too.
Maximize Loan Repayments
Repay loans as much as possible. The more money is paid back, the shorter the period of loan will be and the quicker you will be debt-free. Those who enjoy an unexpected windfall, inheritance or extra money from tax refund should use the money to repay whatever loan there is. Proper budgeting is also crucial to ensure there is a substantial amount left each month to make loan repayments.
Debt management should a priority in the current economic climate. Families can reduce debts if they find the best loan, refinance loans, consolidate credit card debts, minimize loans and maximize loan repayments.
Those who find this article useful may also like to read How to Reduce Debts, Credit Card Guide and Money Making Ideas for Families.
References:
Kimball, Cheryl and Doria, Faye Kathryn. The Everything® Get Out of Debt Book. Avon, Massachusetts: Adams Media Corporation, 2002.
Bekiaris, Maria. “Shrink your Costs”, Money magazine. Australia: ACP Magazines, March 2008.
 |
