Credit Cards, How to Get Out of Debt, Save money

How I became debt free quicker. Snowball it! 7 Tips

Debt free is not a long distant target that you can’t achieve. I did it for the first time in 2015.

Do you long to be debt free finally? So you have bits of debt scattered around? Question is what do you pay first?

Debt free - 7 ways

Debt free – 7 ways

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Just to give you a bit of context, I am now again in debt, due to choosing to pay for a car this way, so come along on the journey with me. I want to pay this off as quick as possible.

Debt free quicker tip 1 

Well, what I have done in the past is something called a ‘Debt Snowball’. This involves writing down, or putting everything in one place first, working out which is most expensive and paying this first. The debt ‘snowballs’ because when you have paid the most expensive balance off first, you then pay off the next with the payment amount from the previous balance.
Originally, at the time my husband and I had debts that we didn’t know everything about. For example, on one set of paperwork, the interest rate wasn’t listed.
As a result, I had no idea how much interest we were paying every month. Once you have figure out what your debt is costing you, you can make a decision as to which debt is the most expensive.

Debt free quicker tip 2

I telephone all the companies I have debts with.

I telephoned all the companies I didn’t have clear information for and kept the key information for each in a safe place. Every company I contacted was more than happy to help with the information.
Top tip 
If it was a credit card, I also asked if I had any promotional rates on them, what the details of the deal were, and when they ended.
Barclaycard     £5000          0% ends 10/2021
Tesco CC          £3500          0% ends 08/2020
Halifax             £ 2000         0% ends 12/08/18
Car loan          £6300           12%

Debt free quicker tip 3

Credit cards

I always allow myself 6 weeks to find another credit card balance transfer deal – this way I can avoid any costly rises in interest.
For example – my credit card may give me an interest free deal 0% for 27 months, but as soon as this is up, I could fork out over 30% interest. This then makes my balance potentially more expensive than other debts.
So, armed with all this information, I looked at which debts were the most expensive and next to each one on the list I attached actions.


 

Debt free quicker tip 4

Once I am armed with information, I take action!

I applied for a balance transfer for one credit balance – but I made sure I used a soft search first. A lot of money comparison websites now offer this, in return for filling in some general details. This gives me the best results for me, based on my credit score, and doesn’t harm it at the same time.
Being sure I had a high percentage of approval, I made one application. Because I had been careful to go for a high percentage rate of approval, I was successfully accepted for the full credit amount I needed to make one credit balance cheaper.
Using the above example, I would apply for a balance transfer for the balance ending its promotional rate on 12/08/18
Barclaycard     £5000          0% ends 10/2021
Tesco CC          £3500          0% ends 08/2020
Halifax             £ 2000         0% ends 12/08/18
Car loan          £6300           12%

Debt free quicker tip 5

I try to avoid making too many credit applications at once, as this could lower my credit score.

With this sorted, I added up all my debt payments and other household bills, and then worked out what I had left from my income. This became my overpayment money every month towards my most expensive balance. for example £50.
As it turned out, I was able to overpay my loan by £50 a month. I could reduce the overall balance much quicker, and cost myself less interest along the way.

Top Tip

(Tip – find out from your lender how you can overpay, as you do not want to incur unnecessary penalties, by not following the rules of the credit agreement. Again talking I find, is the best policy.)
Once this was paid off, I used the payment towards this + the £50 overpayment, towards the next most expensive debt to pay off.

Step 1 – Example

Using my example underneath, I can see that my car loan is the most expensive here – I would ring them and discuss overpayment options and then proceed to over pay within their rules.
Barclaycard     £5000          0% ends 10/2021                                payment £100
Tesco CC          £3500          0% ends 08/2020                               payment £ 70
Halifax             £ 2000         0% ends 12/08/18                               payment £ 55
Car loan          £6300           12%                                               payment £ 220

Step 2 – Example

When I finished paying my car loan, I would put my payment of £220 towards my the next balance on my list. The other balances, because they are credit cards, can be taken down to their minimum  payments.
Barclaycard     £5000          0% ends 10/2021                                payment £100
Tesco CC          £3500          0% ends 08/2020                               payment £ 70     now pay £220 and £50                                                                                                                                                              overpayment and £70
                                                                                                                                         original payment = £340
Halifax             £ 2000         0% ends 12/08/18                               payment £ 55 (balance transfered new deal – 0% ends                                                                                                                     2022)

Step 3 – Example

Then…..
Barclaycard     £5000          0% ends 10/2021                                payment £100 now pay £349  + £100 original                                                                                                                                              payment = £440
Halifax             £ 2000         0% ends 12/08/18                               payment £ 55 (balance transfered new deal – 0% ends 2022)

Step 4 – Example

Finally…
Halifax             £ 2000         0% ends 12/08/18                               payment £ 55 (balance transfered new deal – 0% ends                                                                                                                                                2022)
                                                                                                                                     now pay £440 + £55 original                                                                                                                                                 payment = £495
Until you are debt free!

Debt free quicker tip 6 

I set calendar reminders along the way for the end of balance transfer deals.

I remember to set myself calendar reminders,  as my balances could come to the end of their deals. Above is just a basic representation of how I did it.
I actively cut down the debt because I was reducing the interest on it. I kept the payment at the same level, even though I had paid off more than one balance.

Debt free quicker tip 7

I try not to lower my payments – if  I can afford them. 

It was so satisfying to see my efforts really coming to fruition. Avoid my mistake midway through paying the debt off and try not to be tempted to lower your payment as your debt decreases – it is tempting and easy to get used to the new amount of cash you have! Believe me I have done this, so I know!

Final Thought from Me

Finally I try to bear in mind that I am a human being, and every so often, will make errors, or mistakes. I have made many along the way, but I have always noted down what it was, and found a solution for the next time I approach the particular thing I got wrong. That way I learnt from my mistakes, and these tips above represent what I have learnt over the last 10 years. So this time, as I am in debt again, I am so much more prepared. I am always mindful that I am prone to forget a key date – thank goodness for google calendar. It keeps these so I don’t have the panic moments I used to have.
As always, if you have comments to add, any success stories or advice, please feel free to add your comments or tips here.

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