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Tips to save money on interest

Updated: Mar 11, 2021

If you have any type of finance, then in most cases, the simple fact of life is that you will be paying interest on those loans or credit cards.

But there are ways you can manage that interest cost, by considering some of the following options -

  • If you can, clear your credit card in full before the minimum payment date - if not, pay off as much as you can to reduce the balance outstanding. If you find it difficult to control your spending with a credit card, move to a debit card instead and use your own money and not the lender’s.

  • Conduct a review on the loans or credit cards that you have and the interest rates that might apply to each as it obviously makes sense to clear the cards or loans that have the highest interest rates as quickly as possible. If you’re not sure, seek out some advice regarding the possibilities to perhaps accelerate the existing repayment plan in some way or look at consolidating if appropriate.

  • Deposit your savings into an interest bearing account and offset those funds against your home loan account if your bank allows it which may assist to reduce your loan interest charges.

  • Deposit additional funds over & above the minimum loan repayment to reduce the loan balance quicker - interest is calculated on the loan balance outstanding, so less outstanding equals less interest (but…. take care that your loan / lender allows you to do this, else you could risk paying additional penalties).

  • Deposit any spare funds you might have into the loan as they become available as a forced savings measure. Building up your equity in this manner may allow you to utilise the loan’s redraw option if you have need to use those funds in the future (again….check if your loan has this feature first).

  • Make more frequent repayments, perhaps, fortnightly instead of monthly – again, with interest calculated on the balance outstanding, the less you owe at any one time equates to a lesser interest charge at the end of the month.

  • Choose the most appropriate product for your circumstances & lifestyle. Consider the merits of splitting your loan between a fixed rate and a variable rate….fixing a portion of the total loan amount will ensure certainty of interest rate and repayment, whilst retaining a portion on a variable rate will provide some flexibility for additional reductions or redraw.

  • Work out what features you want or need in a loan product and choose one that fits your situation– it might be that a more basic product has a lower interest rate than one with lots of features and options, that you may not need or use.

  • Don’t be afraid to look for a better deal. A lender essentially ‘sells’ money, with the interest it charges effectively being part of its fee to do so…….so why shouldn’t you get what you’re buying for the best value possible?

Reviewing the rates and features available to your loans on a regular basis allows you to keep abreast of changes to interest rates & products so that they complement your financial lifestyle and changing circumstances. Changes to interest rates & products are occurring constantly, so it’s a good idea to do this at least every 18 months / two years as a rough guide. With many different options and offers available, there can be a lot of information to sift through and your Finance Broker can help alleviate that stress by doing that work for you.

If we can help, don’t hesitate to give us call.


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