Targeting High Interest Debts DIY debt solution
Summary: Targeting High Interest Debts - This paper underlines the importance of selecting which debts are priority debts to clear as quickly as possible.
Meeting required payments
A debtor with a number of different creditors will feel that all minimum or contractual repayments on debts need to be met in order to keep creditors happy and maintain a reasonable credit rating. The moment such a payment is missed, creditor action may follow and the missed, late or less than minimum payment may be flagged on our credit file.
Minimum payments and ongoing debt
The problem of course with minimum payments on cards is that with added interest, the debt is reducing by nothing like the amount of the payment. It will take a very long time to clear such debts by sticking to minimum payments, in fact in some cases the debt may never be cleared (e.g. high interest store cards or catalogues). Therefore any extra monies available need to be targeted.
Keeping up with interest charges
Some of us are scrupulous at keeping track of debts. However some of us are not! Credit card and other debt statements arrive and payments are simply made. Life is too busy to actually read them. Same applies to the standard letter gently informing us that the interest rate on our account is increasing -again. Or we set up standing orders to meet the minimum payments and don't even receive statements. It can be after a number of years that we realise we've been paying this particular debt for ages - and the balance doesn't seem to have changed by much.
Regaining control through targeting
It makes sound financial sense to target the high interest debts we have. Balance transfers may help, as might utilising an overdraft or loan. However it needs to continue to be monitored as some arrangements can be for a fixed period and we may find ourselves back in the same position if high interest rates kick in after a certain period. Any extra funds we have available should be paid into the higher interest debts. There may be a temptation to clear a small debt to reduce the number of creditors. However, better to consider carefully where our payment is going to best work for us by reducing the interest charges incurred.
The above is provided as information only. Iva.co.uk does not provide debt advice. You must always seek professional advice before taking any action to resolve your debts.