Paying Off A Loan or Credit Card

• Personal loans and credit cards have very high interest rates compared to home loans so you should start paying off loans and personal debts such as these as quickly as possible. To help you do this make sure that you have your household budget and a debt consolidation repayment plan in place.
• As a last resort you can use debt consolidation to refinance credit card and personal loan debts together with your home loan, if you have one. However, before you do this you MUST make sure that you put in place personal financial planning procedures to stop the debt accumulating again, otherwise you will just find yourself needing to pay off a bigger loan in a few years time.
• With personal loans, and indeed with any other sort of loan, beware of any penalty charges for paying off a loan early. These sorts of fees can turn a good loan into a really bad loan because you may find yourself stuck with a particular loan, even if your financial situation changes for the better and you want to pay off a loan early in order to save money on repayments.
• If you miss paying off a credit card balance by the due date, even if it is just 1 day, you will be hit with hefty interest charges. Most banks will either back date the interest for every purchase or charge you interest for future purchases in the next month. So be aware of how the interest is charged on your credit card and, if possible, try to pay off credit card balances in full by the due date each month.
• Talk to the bank which issued you the credit card about setting up an automatic payment from a specific bank savings account on the due date of each month. This way you can't forget to payoff a credit card and will never have to pay any interest on your credit card, provided that you have enough funds each month in your nominated bank savings account.
• NEVER get a 2nd or 3rd credit card to take advantage of the low interest rates available on balance transfers unless you are going to cancel and cut up your original credit card. Otherwise you will just have double the amount of credit available and in a few months time you will simply be paying interest repayments on 2 credit cards.
• Transferring your credit card balance to a new card with a low or zero interest rate on balance transfers can be a useful money saving idea if you are disciplined and vigilant. If you think that you want to adopt this strategy for paying off credit card debts then there are 2 methods that you can choose :
  1) You can choose a new credit card with a low interest rate that is applied only to the balance that is transfered, but for as long as the balance remains outstanding.
  2) Alternatively you can transfer the credit card debt to a card that has zero interest on balance transfers for a specified period and then, after that period expires, transfer it again to another card with a zero interest rate on balance transfers. This method save you more money in interest repayments, but you have to do more work, be vigilant about the expiry date of the introductory period, make sure that you pay off debts as you go along and also be careful that applying for too many credit cards doesn't hurt you personal credit rating.
• It is generally only advisable to go into debt for an appreciating asset such as a house or land and not for items like a new car or holiday. So only consider taking out a personal bank loan if it is absolutely necessary and you are extremely confident about paying off the loan in as short a time as possible. It is much better to adhere to the old adage of "if you can't afford it then save, save, save until you can".
• For personal loans always ask if you are able to make extra repayments at any time, whether there are any fees for paying off a loan early and how long the life of the loan is. Remember that if you get a personal loan for a longer period of time the repayments may be less but over the life of the loan you will be paying a lot more in interest.