45. How to take advantage of interest rate cuts - 26 May 2009
Considering the uninterrupted interest-rate cuts since December last year, we should all have some extra cash in our pockets.
The prime lending rate has gone down considerably since December, but are you making the most of these cuts?
Luke Hirst, MD of Debtbusters says ‘In these erratic financial times, any extra cash should be seen as a blessing and be spent wisely – especially if you are in debt.’
Here are some valuable tips from the Debtbusters team to help you to utilise any extra cash correctly, putting you in a better financial situation.
Clear expensive debt first:
Remember: personal loans, credit cards and store cards are all going to vary in the interest rates they charge. While it is important to remain up to date with all your debt repayments, any extra cash you may now have as a result of the interest rate decrease would be best used by servicing your most expensive debt first.
Remember – while you should never fall behind on any repayments, by paying in extra whenever possible, you can vastly decrease the amount of money you will pay and the term of your repayment.
Take now, pay later? Forget about it!
Swap your credit card for a debit card to make sure you only spend what you have. Yes, it is convenient to be able to take something now and pay for it later, but it makes for a budgeting nightmare. By using a debit card whenever you can, you will never spend more than you have and you’ll avoid the added problems of interest on your purchases.
Only save if you are making more than you owe.
While the decrease in interest rates is great for the indebted, it also affects your prime linked savings accounts. If you put money into a savings account that is giving you 6%, aren’t you better off using that extra money to service a debt that is costing you 15% interest? While saving is vital, getting out of debt should be your priority.
