Improve your debt situation

DEBT is a necessary evil for many Australians, but you don’t have to let it rule, or ruin your life.

Heritage Bank offers some handy pointers on managing your debt more effectively.

Review your budget

A great place to start is reviewing your budget and setting realistic goals and expectations for your finances.

Ensure all expenses are included in the budget, including loan repayments.

Review your general spending and look for areas of improvement.

Once you’ve pinpointed spending you can realistically cut back on, you can then set a budget to guide your living costs and fixed expenses.

Understand that not all debt is bad debt

It’s important to understand that debt can be used as a positive tool in growing your wealth.

Taking advantage of interest-free periods on credit cards and getting the best rate possible for loans can be incorporated positively into a financial strategy.

A financial planner can help with incorporating your debts into a strategy to help make the most of your financial situation into the future.

Prioritise which debts to pay down first

Prioritising the payment of debts higher in interest makes sense.

It might also pay to look into whether consolidating high interest debts into one debt will help you save money and pay off the debt sooner.

Make use of interest free periods on cards

It is possible to use a credit card as an interest free loan.

It’s important to understand the ‘loan terms’ of the card to ensure you are in fact better off.

Understand when you have to pay the money back and what will happen if you don’t.

You can generally avoid paying interest by paying off the amount owing in full each month.

Keep an eye on interest rates

Keeping an eye on interest rates, understanding interest rates and switching your loans to take advantage of good rates could all work towards saving you money.

It’s important to remember to look at all the information when shopping around for interest rates.

For example, you may find a rate with a zero per cent interest offer period, but the rate at which you pay after that period may be substantially more than another offer – costing you more in the long run.

Interest rates and offers can be confusing, so talk to somebody who can help you understand what is being offered. If you are still unsure seek further clarification and help.

Seek help from your lenders

Do not hold back from talking to your lenders if you are finding it difficult to make repayments due to change in income or emergency spending.

By talking to your lender you may find ways to help consolidate debt and reduce the amount of interest you are paying.