Managing a variable income

Easy Ways To Get Out Of Debt

In the wake of several years of financial uncertainty, many self-employed people have struggled and are now picking up the financial pieces.  In order to avoid the attentions of a commercial debt collection company, you'll need to work closely with your company accountant to get your financial house in order.  Luckily, now that interest rates have finally fallen, you can regain control of the purse strings relatively cheaply. 

Here's a quick guide to give you some pointers:

Credit card balance transfer

This strategy is really a no-brainer.  If you have run up credit cards debts, transfer your outstanding balance to a 0% balance transfer credit card.  This means that the interest you pay on your debts will be zero, for up to 29 months.

Remember that there is a fee chargeable for transferring and this varies between cards.  Also, it's important to clear the outstanding balance before the end of the 0% deal, otherwise you'll end up paying interest at the standard rate and your costs will begin to mount up.  Another important point to note is that you can't usually switch from one card to another within the same banking group.

0% purchase credit cards

A 0% purchase credit card means that you pay zero interest on any spending that you do.  These are offered as promotional deals, so once again make sure that you clear any outstanding balance before the expiry of the deal or you'll begin to accrue interest.

Bank loan

If you have a large debt or don't qualify for a 0% credit card, you might be better off with a fixed repayment schedule, in which case an unsecured loan might be the best option. 

A personal loan has a fixed interest rate for a fixed term – generally between 12 months and five years.  You know exactly what your monthly repayments will be during this time, which can make it easier to budget and there are no nasty surprises as regards interest charges.

Overdraft

Although an authorised overdraft is useful in an emergency, it's a very expensive way to borrow money.  Try to use your overdraft for small amounts over the shortest possible term, and always notify your bank if you think you are likely to go overdrawn, as unauthorised borrowing charges can be pretty hefty.

Mortgage or secured loan

When you need to borrow a large sum, typically over $25,000, personal loans and credit cards are likely to prove very expensive.  The best option here is probably a secured loan or a remortgage.

Bear in mind that you might incur penalty charges for switching to a different lender and don't forget to include mortgage fees when calculating how much this option would cost you.

In conclusion

There are many ways in which you can work to clear your debts before the debt collector calls.  Ask your accountant for more advice and assistance and regain control of your finances.


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