Our Service

Tips to reduce Debt

Today lending institutions seem extremely keen to promote credit facilities to consumers as they compete for their share of the credit market.

Tips to help you manage your debts and reduce them quickly include:

  1. You should do a budget (choose the one that suits you best - weekly, fortnightly or monthly) to work out whether you can afford to purchase goods or services. The budget should cover everything and include expenses that occur regularly eg rent, food, electricity, and also those that are normally paid once or twice a year, such as insurances, holidays, birthday, Xmas presents etc
  2. After completing a budget, you should be able to see how much you can afford to spend on the items you want. Most people who have money trouble have not done a budget and don’t usually know how much they spend each week and therefore don’t know how much they can afford to repay. www.simplybudgets.com
  3. Once you have worked out your uncommitted (left over) income, decide what you need to purchase, and then what you would like to purchase. This will indicate to you what credit or loan facility might suit your needs. The more carefully you plan for your spending, the more likely you are to successfully manage your accounts and money.
    1. The types of credit facilities include:
      i) Personal Loans – Suitable for large one-off purchases such as a car or a holiday overseas. Interest rates are normally fixed and significantly less than most credit cards. Repayments are normally direct debited from your bank account
      ii) Credit Cards – Allows the user to make multiple purchases up to a certain pre-approved credit limit. Most credit card accounts have an interest free period as long as the full amount is paid before that date. If you don’t pay the full amount by the interest free date, interest charges are high and penalties for late payment are also charged. Of course, the less you pay each month, the harder it will be to reduce the balance on the account, as interest will be added on the outstanding amount each month. Payment of the credit card account is monthly and normally done voluntarily by the consumer unless it is linked to a savings account for direct debit. You should look around for the credit card which best suits your needs.
      iii) Debit Cards - Provides the convenience of a credit card except that you are spending your own money, as they are linked directly to your bank account. The benefit to the user is that you cannot spend more money than you have although some transaction charges may apply as well
      iv) Interest Free - No repayment Store Cards – These are advertised by many large retail stores. Customers can buy goods today and not pay interest for maybe 12 months, or else not make repayments for maybe 12 months. Provided you pay for the goods in full within the specified time, they can be beneficial to customers. Once the “interest free” period has expired, these accounts have high interest rates often more than 20% per annum.
  4. Once you have decided on the credit type that best suits your needs, shop around as the fees and charges can be very different from one lender to another. Make sure you read the terms and conditions of the lender and don’t be afraid to ask as many questions as you need, so you are sure you have the lender that suits you.
  5. Once you have the credit organized, try to say “no” to all requests from the lender to increase your existing credit limit. Also, try not to have more than one or two credit accounts as it becomes more and more difficult to keep track of your spending and you have to make lots of different payments.
  6. Always make sure that you pay the minimum of your account each month so you don’t get expensive late fees. If possible, you should always try to reduce the account balance on the loan with the highest interest rate, fees and charges.
  7. Make sure that your credit card does not reach its limit as you may need to use it in the case of an emergency or for unexpected expenses.

If you are having difficulty making payments, ask for independent assistance before the creditor starts recovery proceedings or you get a default on your credit file.

For more tips on money management, finance, investment and a variety of calculators: www.fido.asic.gov.au

Free Assessment! Click Here