Some ideas for reducing your debt interest repayments
By Mr Bankruptcy
14th February 2024
When it comes to debt interest, nations can have similar debt problems to businesses and individuals.
According to the Office of Budgetary Responsibility, the UK spent £110 billion on debt interest alone in 2023. That’s around £5 billion more than the education budget. At over 10% of total government revenue, that was the highest level of interest cost for any developed country last year, a situation not helped by the increased cost of borrowing in recent years.
When you borrow sums of money, creditors expect to receive regular interest payments. If you can’t pay them, or can only make a minimum payment, then your debt will grow each month, eventually harming your credit rating as well as leaving you with less money at the end of the month for other essentials.
The only difference is that nations sometimes just print off money when they need to pay their interest repayments (creating more problems in the long run but that’s outside the scope of this article) while the rest of us, without own personal mint, have to manage our repayments in order to avoid debts becoming unmanageable.
So, what can individuals do to help reduce their debt interest repayments to manageable levels?
Ways to regain control of debt interest repayments
Politicians sometimes think that basic good housekeeping doesn’t apply to national finances; they may not even agree on whether a debt is increasing or not. But the rest of us don’t have that luxury. However, if you are getting behind with your interest repayments, there’s no need to despair. This may sound obvious but practising some sound budgeting principles can help get you back on track.
- Prioritise debts with the highest interest rates. Write down a list your debts in order of the interest rates, the highest at the top. Make minimum payments on your other debts in order to avoid penalties, but focus on using any spare cash to pay the top debt off first. It’s costing you the most, even if the actual sum isn’t the largest you’re paying out monthly. Once that debt is paid off, target the next one on your list, and so on. I always believe that writing down a list of your debts also helps to put your situation in perspective, making it more manageable.
- Get a debt consolidation loan. Average the interest rates on your current balances and look for a new loan with a lower interest rate. You may even have a cheaper line of credit elsewhere. It might sound counter-intuitive to get another loan but the money you borrow will pay off your consolidated debts and it will cost you less interest in the long run. It’s also easier to keep track of a single repayment every month than multiple bills, so you’re less likely to forget a payment.
- Ask your creditor for a lower interest rate. They don’t generally want you to default on your debt and may be more willing to be flexible than you think. You won’t know until you ask. If you owe money to a bank or credit card provider, do some research and see if they offer a lower rate on one of their other products. If you qualify for the new account, you can ask to be transferred to it.
A multitude of interest demands every month can seem disheartening, but it is possible to take back control of your finances with some simple measures. However, the most important thing is to take action and formulate a plan.
It usually helps as well to talk to someone you trust about your financial worries. They don’t have to be a financial genius, but getting your worries off your chest will be much better for your state of mind and may even spark new ideas for a solution. Talking to a professional debt advisor could also help you to navigate a path through your debt worries to a brighter future.
James Rosa Associates
James Rosa associates is a firm of debt advisors and debt adjustors offering a full range of advice and professional services to both individuals and business owners/directors, including:
At James Rosa Associates, we are well known for taking a friendly and non-judgemental approach, putting clients facing unmanageable debt at their ease and giving them hope.
We are, of course, authorised and regulated by the Financial Conduct Authority (FRN665061) to work with clients to produce bespoke solutions to match their specific circumstances.
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If you need to tackle an unmanageable debt or interest repayments, or want to bring a dispute to a happy resolution, then contact James Rosa Associates, ring 0845 6807217 or email us at enquiries@jamesrosa.co.uk to find out whether you qualify for one of our free consultations.
Please be advised that all views expressed in these posts are those of the author and not of James Rosa Associates ltd.