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Minimise Debt by Restructuring and Using Big Company Cash Back Deals

With Christmas a dim and fast fading memory it’s time to turn your attention towards choosing a holiday in the sun where you can forget all those Yuletide debit card purchases and uncleared credit card balances you left behind. Or did you? How difficult will it be for you to fund the obligatory summer getaway with cards and accounts already straining under the weight of yesterday’s good times?

The abstract and sensible answer is not to go, save your money, and start chipping away at your own personal debt mountain. The real world emotional truth is how to tell your family, kids and indeed yourself that you don’t even deserve a caravan in Clacton this year. You will instantly become a Pariah and no two ways about it.

Third way? Debt consolidation and restructuring – even reduction. This is not a get out of jail free card and has to be approached with some thought. Debt reduction agencies abound in these times of soaring tax rates, slumping property prices and lately the “credit crunch”. Caution is needed though, as many of these “services” are little more than loan brokers, (read sharks), who will relocate your debts to companies that will pay them commission rather than reduce your liabilities.

Simple is usually best.

First approach your bank and a recommended IFA. (stress on recommended) to look at what is immediately available. Simply moving your debts away from an assortment of 29% APR credit cards towards one loan, (consolidation), can make your monthly repayment far more realistic. Your bank will not offer the lowest interest rate but you will be sure to avoid the pitfalls of questionable small print and unknown penalty clauses associated with the smaller hungry high street companies.

Care has to be exercised regarding the choice between secured and unsecured loans. Secured loans often offer lower interest rates because the lender has greater recourse to recovering funds if you don’t manage to keep up repayments. The pay off here is that if you do get into trouble, the secured loan lender can get their hands on your home, forcing you to sell, if things go wrong.

Other Routes.

It may seem crazy to go back to the very people who helped you get into trouble in the first place but look at current credit card offers. 0% interest for six months on balance transfers is not uncommon and can temporarily reduce your repayments whilst you get your affairs in order. Remember that many small savings can add up to one card debt getting cleared away.

Service Transfers and Cash back.

There are hordes of companies out there who get commission for persuading you to transfer your service agreements and they are willing to share some of it with you. Services include all the major utilities, insurance companies, mobile phone, and broadband. Swap to Sheila’s Wheels for £30 cash-back; switch to Nationwide Home Insurance for £70 cash back; switch to Pru Health medical cover for a whopping £190 cash back; go back to British Gas for £40 cash back; Eclipse or AOL broadband for £45 cash back. Either approach the supplier direct or go to a portal such as Moneysupermarket.com for more details and easy comparison tables.

Don’t forget the biggest outlay of them all, your mortgage. Building societies, and lenders generally, spend vast amounts on advertising to get new customers at the expense of their existing ones. Typically, an existing customer will not be rewarded for loyalty but actually penalised by being patiently told they do not have access to the best deals with their current lender. That is until you look for another lender. Nationwide are offering 5.63% on a five year fixed rate to borrowers who want to switch whereas a lot of home owners are sitting up at the 8% end by staying true to their lender!

Reduce Your Outgoings.

Apart from the cash back angle there really are significant amounts to be saved simply by switching service providers, and here we’re thinking along the lines of mobile phones, satellite TV, broadband and all the other “essentials” of modern life. Broadband typically starts at around a tenner a month, but existing contracts with BT (one example) can still be running at £26.99 per month. Over a year that means BT Broadband has, without embarrassment, diverted over £200 of your Tenerife spending money!

Bin your Vodafone contract, buy a Pay as You Go SIM card and save £300 a year. Mobile contracts are a real goldmine for the provider (ever wondered who pays for those “free” upgrades – you). Apart from the heaviest users you will invariably find your £35 a month will be paying for unused “free” calls and texts. Free in that you didn’t use them but did pay for them.

Tme for Action

Do it and do it now. List out all the outgoings, switch and ditch suppliers and make those savings and cash back rewards, slash and burn. But please do it today. Paradoxically, there are people getting fat off your inaction. Put them on a diet starting now!