DEBT OF GRATITUDE
Martin Lewis reveals how to cut ALL your debt costs in 7 steps
MILLIONS of Brits have racked up debt over the years - but with the help of Martin Lewis you can cut your bills.
In his yearly debt masterclass, the MoneySavingExpert's founder has made a round-up of ways to get rid of it - and it doesn't have to be that hard.
2
Earlier this week, it was revealed that unsecured debt - anything that isn't a mortgage - hit record levels last year with the average household now being £15,400 in the red.
This comes after a rise of £886 from the previous year and means that the average working family is now worse off than before the financial crisis.
Luckily, there are several ways to clear this type of debt.
Martin Lewis said in that it's important that borrowers focus on reducing the rate, as it means more of your repayments clear the actual debt rather than just pay the lender, so you're debt-free quicker.
If you have debt with various lenders or in different products, you should prioritise repaying the one with the highest interest first and just pay the minimums on everything else.
To clear your debt costs, here are seven ways to help get your bills down.
Cut costs of credit cards to 0 per cent
You can easily cut the costs of your credit card debt by transferring it to a 0 per cent balance transfer credit card.
This means you get a new credit card to repay debt on old cards, but you owe it instead at 0 per cent during a set period of time.
Overall deals have dropped recently so you'll need to be quick, but there are still good offers out there.
Santander, for example, offers a balance transfer card with no fee at a 0 per cent interest rate for 27 months.
2
"But don't just apply willy-nilly," Martin stressed.
"Each application marks your credit file, so if you're rejected and apply again, it gets trickier."
If you are interested in a credit card, you should use an eligibility checker to work out your chances of being accepted without leaving a mark on your credit score.
If the chances are high, you can apply with confidence but if they aren't that great, you can look elsewhere with no harm done.
Also remember to clear the debt or shift it again before the 0 per cent period ends or you'll be hit with hefty interest rates.
BALANCE TRANSFER CARDS: WHAT YOU NEED TO KNOW
SHIFTING your balance can be a great way to cut the cost of your debt. But you must use them properly so you don't just add to it.
Always clear your debt - Credit card firms don't offer these deals out of the goodness of their hearts. They rely on you not clearing your balance by the time the 0 per cent deal comes to an end so it can start charging you interest.
Always make your payments - If you don't keep up with your monthly payments, you could lose the 0 per cent offer and start being charged interest. Always try and pay-off more than the minimum payment too to clear your debt quicker and don't spend on the card either.
Check your deal - Like with all credit cards, you might not be offered the headline deal if you don't have the best credit history. Use to see what deals you are likely to be accepted for.
Shift store cards to balance transfer cards
Store cards are credit cards that you only use in one store chain, but they tend to come with much higher interest rates, warns Martin.
It's not surprising then that complaints have doubled in just a year, with the figures blamed on sales staff trying to "flog as many as they can".
Last month, the Financial Conduct Authority also announced stricter rules for companies offering these types of credit.
Luckily, you can balance-transfer store card debt too in the same way that you would with any other credit card - and it could save you up to £300.
Cut costs of overdrafts
If you're constantly in your overdraft then the fees could add up and if you find yourself going over your agreed amount then it could be more expensive than a payday loan.
Martin suggests fixing this by either switching to a 0 per cent overdraft or moving your balance to an o per cent transfer credit card.
Once you've cleared your balance make sure you've got an account with a good deal.
Online-only bank First Direct currently offers up to £125 in cash for customers who switch to it but don't forget to compare accounts before switching to make sure its right for you.
Get a personal loan to pay off debt
You can use a loan to clear an old one, Martin advises.
The best option for you also depends on your personal circumstances and self discipline, according to other money experts The Sun has spoken to.
We've compared personal loans and balance transfer cards - you can check out the best option for your debts here.
No matter which option you go for, use an eligibility checker to see which rate you're likely to be accepted at.
And remember that just like any credit, only 51 per cent of accepted customers will get the marketed rate.
Here are some of the cheapest personal loan deals around right now.
Payday loans and other high cost credit
If you have other types of expensive credit, it's important to deal with them quickly.
Payday loans are designed to be short term loans of £100 to £1,000 that – as their name suggests – are designed to help you get through to the next payday.
But they come with hefty interest rates, just like rent-to-own agreements and doorstep loans, meaning the total amount you owe will rise rapidly unless you pay it off.
If you previously had a payday loan and couldn't afford it, here's how you can reclaim payday loans for free.
Student loans
Unless you earn a lot, you're actually better off to not clear your student loan in full, so avoid paying more than necessary each month, according to Martin.
But it also depends which type of loan you have, which in turns depends on when you started studying.
See our guide on when all student loans are written off and when repayments stop here.
Get help with your debts
The help above is designed for those who can handle repayments, and this may not be the right solution for everyone, Martin said.
If any of the below applies to, you should consider getting help.
- You can't meet minimum monthly payments
- You have debts other than mortgages bigger than a year's salary
- You struggle to sleep or suffer from depression/anxiety over debt
If so, forget the solutions above and get free, one-on-one debt-counselling help from , or .
And if you need emotional support too, you can try .
Other ways to cut the costs of your debt
BEING in large amounts of debts can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis - knowing your spending patterns is the first step to managing your money.
Work out your budget - by writing down your income and taking away your essential bills such as food and transport.
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs.
Pay off more than the minimum - If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker.
Prioritise your debts - If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them.
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay.
More on debt
If you've found yourself in a lot of debt, here are nine easy steps to clear it before the end of this month.
You can also take years off your credit card balance by increasing payments by just £1 a day.
Nearly half of Brits are hiding a total of £96billion worth of debt from their family and friends.
Martin Lewis reveals £150 FREE cash by switching banks in New Year money saving deals
We pay for your stories! Do you have a story for The Sun Online Money team? Email us at money@the-sun.co.uk or call 0207 78 24516. Don't forget to join the for the latest bargains and money-saving advice.
Topics
