3 Steps to Pay Off Debt Before Interest Rates Rise
Rise of The Interest Rates: 3 Tips To Avoid Ridiculous Rates
We’ve become accustomed to low, low interest rates in recent years.
However, as any economist will tell you- what goes up must come down and what goes down must come up.
If you’re expecting interest rates to stay low forever, you could be in for a rude awakening when they start to rise.
And when interest rates get higher, your debts can become much harder to manage.
The more of your monthly repayments on your loans or credit cards goes towards interest, the less goes to paying down the principal (the amount owed).
This makes your debts last longer and places more of a stranglehold on your household’s cash flow.
Here are 3 steps to help you to avoid rising interest rates and get debt free faster…
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All-too often we rely on credit because we have lost track of our household income and expenditure.
Because we haven’t allocated our income responsibly, we find ourselves needing to lean more heavily on our credit cards to get us through to the next payday.
However, the more we add to our debts, the more we can expect to pay in interest.
Especially if your bank or creditor hikes up your interest rate at short notice.
Use one of these household budget templates to keep track of your monthly spending.
It’s a great way to keep track of all the little expenses that can quickly eat into your income and make it harder to manage your finances.
Only when you have a true understanding of your household income and expenditure can you take control of your financial wellbeing and liberate yourself from debt.
The faster you can pay off your debts, the faster you can avoid rising interest rates.
Get off the credit wagon and start saving!
How much are you paying into your savings account this month.
If your answer is “what savings account”, you may have a problem when interest rates start to rise.
Your savings are your greatest weapon in the fight against debt.
When you pay into your savings regularly, you are able to pay for life’s unforeseen expenses without giving up more of your hard earned money to pay interest to your creditors.
You may well be thinking “But I can’t afford to save”, but the truth is that you can’t afford not to save!
With a proper budget, you will be able to make regular repayments on your debts while also squirreling a little away every month to go into your savings account.
Choose a high-interest savings account to make interest work for you rather than against you.
It’s okay if the amount you pay into your savings account changes every month, to match your income.
Just so long as you’re sure to pay something in consistently.
If you’re having trouble sticking to your budget, try going on an all-cash diet.
Avoid using credit or debit cards and only spend cash for your general expenses.
This makes it much easier to manage your budget and avoid relying on credit.
Set up a plan to repay your debts while interest rates are low
Low interest rates may be advantageous.
But they should certainly not be viewed as an invitation to use more credit.
In fact, they should be treated as a ticking timebomb.
If interest rates rise, you may find yourself paying almost twice as much in monthly repayments.
Or paying far less of our principal while wasting more money on interest- potentially prolonging the debt for years.
As well as avoiding high-interest arrangements like cash advances or deferred payments, set up a plan to repay your debts faster and take advantage of low interest rates.
We can help you to take action now!
Don’t wait for interest rates to rise and imperil your household finances.
Take control of your debts with an appropriate debt relief plan.
As Canada’s top bankruptcy and consumer proposal information website we’ve helped over 100,000 Canadians from all walks to life to improve their financial wellbeing and escape their debts.
We can dispel the myths and bring you the facts to help you make an informed decision.
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