Borrow cheaper

Never borrow more money to get yourself out of debt. Instead, borrow cheaper.

If you can borrow more cheaply elsewhere to replace your existing borrowing, then this can be beneficial to you. Lower interest rates mean more of your cash goes towards repaying the actual debt rather than just servicing the interest. Those with big debts may save thousands a year in interest by arranging cheaper borrowing.

Your objective is simple – repay your debt as quickly as possible. The lower the interest charge on your borrowing, the quicker you can repay.

Step 1

First of all you may want to check your credit rating – if they have the wrong data on there it could harm your ability to get new credit. Also, repeated applications for credit that are refused could similarly harm your rating.

A statutory credit reference should only cost you £2. Alternatively, you may sign up to an agency who will typically offer you a 30 day free trial before signing up to their ongoing monitoring service (which you can always cancel).

Two typical agencies are:

•www.equifax.co.uk  

•www.experian.co.uk

Also, if you need to repair your credit history then try: www.ukcreditrepair.co.uk.

Step 2

Move your debts to a cheaper credit card – as long as you are disciplined and closely manage your credit card debt then through ‘balance transfer’ offers you could get some better deals. Typical offers include 0% interest for a year – you could transfer from your expensive credit card to such a cheaper alternative.

To compare deals you may use sites such as:

•www.moneysupermarket.com/cards/

•www.uswitch.com/credit-cards/

Step 3

Alternatively, you could arrange a cheap personal loan – if you have gone as far as you can with moving your debts on your credit cards then perhaps a personal loan could offer you an alternative solution. Such loans offer structured and regular repayments which provides you with a clear view of your debt and how long it will take you to pay it off. Sometimes the interest rate on your loan may even be cheaper than on your credit card.

Be very careful to understand the difference between secured and unsecured loans. A secured loan is typically secured on your house (or another asset you own), meaning if you can’t repay, the lender can repossess your home. With unsecured loans, it is less likely this will happen.

Also be careful to understand whether the interest rate is variable (i.e. can move with UK interest rate movements) or fixed (where you know exactly how much you are paying for the length of your loan).

Finally, don’t forget that lenders often extend the length of your loan (i.e. allow you to pay it off over a longer period) in order to make the monthly payment amounts look cheaper. You may have to pay less each month, but you will be paying for many months more!

To compare loan deals you may use websites such as:

•www.moneysupermarket.com/loans/  

•www.uswitch.com/loans/