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Get a Better Deal on Your Debt

May 19, 2017

Debt - Get a Better Deal

So, last time we spoke a bit about where to park your spare cash.

Paying down debt was right up there on the list, especially consumer debt with its horrendous interest rates.

Instead of just bending over and accepting whatever interest rate you’re given, you can usually get a better deal.

A better interest rate on your debt will do a few things.

It will reduce how much interest you’re charged on your loans.  This means your cashflow position is better. With the extra cash, you can either smash that debt down or invest the money elsewhere.

You already know that compound interest is an investor’s best friend, but you’ve gotta keep him on your team!

Since debt repayments are just another expense, you might as well optimise the shit out of it and make it as painless as possible!

Getting a better rate on a loan always feels like a win.  It feels like you’re gaming the system.  And paying less than you were before on interest is a surefire way to put yourself in a stronger financial position.

It’s like you just created money out of thin air!  More cashflow = more savings = more investments = retire earlier 🙂

 

Negotiate & Compare

There is no shortage of choice when it comes to home loans, credit cards and all the other loans out there in the financial universe.

Instead of just asking your bank or credit provider for a better rate (which you can and should certainly do), it’s best to compare what’s out there so you can make sure you’ve got a good product at a competitive interest rate.

Personally, I’ve had mixed results when it comes to negotiating rates with banks and other service providers.  If you’re lucky, they will drop their rate and it’s happy days, job done!

Sometimes despite telling them directly you will go elsewhere, they only offer a token discount. Or worse, they simply won’t budge and offer you nothing.  Ha! Guess who’s losing business then?

These days loyalty rarely pays and you’re better off constantly looking for better deals.  This habit helps keep your expenses down and reach early retirement faster.

Don’t be fooled, seemingly small increments really matter.  Not only that, it helps keep the bastards honest!

When was the last time your bank rang you up and offered you a discount?  Hmm, thought so.  I do this across all categories of spending and our expenses are lower now than they were 8 years ago.

Inflation can be optional.  And I’m not joking!  Check this out – The Real Cost of Living – An Inconvenient Truth.

OK, so you’ve decided your bank is taking you for a ride and you’re taking your business elsewhere.  But who the hell has time to check every banks’ website to find the best deal?

And besides, most of us have better shit to do!  Help!

 

Comparison Websites to the Rescue!

Nowadays, there are some great websites out there serving this very purpose.  They scope out all the financial products on offer and list the best rates, features and some of them also rate the products too.

Here are some of the websites to check out in no particular order.  Finder, Canstar, Mozo and RateCity.

Once you’re there, you can….

  • Find out what rates are on offer, what features and fees apply.
  • Make a list of the best offers you’ve found.
  • You can then go direct to the bank/credit provider’s website to find out the finer details or read the product disclosure statement.
  • Ask them any questions you might have.
  • Once you’re convinced it’s a good deal and it’s right for you, go ahead and apply.

 

Things to Remember

These comparison websites are not perfect.  They’re businesses themselves, so they often make a commission from your referral.

Nothing wrong with that since they’re providing a good service, but they may show higher commission products above the better deals.

They often don’t have every product on offer, just a portion of the market. So it’s good to compare them against each other and find the best deal for you!

Since there’s nothing to lose except the sandbag consumer debt or a crappy rate mortgage, get over to those sites and check out what else is on offer.

 

Worth the hassle?

Let’s see if the payday is worth the effort of switching.  We’ll start with a mortgage of $300k over 25 years, with an interest rate of 4.5%.

If we shop around and get a rate of 4% instead, this will save just over 25k in interest.*  Not a bad little earner for a couple of clicks and signatures!

Our repayments would go from $1667 per month to $1584 per month.  Since our cashflow would improve by $83 a month, we could invest this extra cash instead and turn it into over 67 grand over the life of the home loan!**

The bigger the mortgage, the bigger the savings to be had.  Just imagine the difference it would make to a mortgaged up Sydneysider!  It’s another example of Making Big Money from Little Changes.

Don’t put it off.   Get a better deal on your debt as soon as possible!

This reduces your interest payments and puts you in a much stronger position, by loweing your expenses and your stress at the same time.

It means more cashflow for you to either pay off your debts faster or invest to achieve financial freedom.

 

*The mortgage comparison calculator on Canstar was used to find the $25k interest saving in the example.

**$83 per month invested at a return of 7% for 25 years gives you $67,236 according to this compound interest calculator at MoneySmart.

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