Many of us have borrowed money before. There are some of us that have borrowed and then paid it back, but others that still have debt and may even be borrowing even more money. Although borrowing can be helpful, such as when we use a loan to go to University or buy a home, there are types of borrowing which are really expensive and can just lead to us getting into debt without a great deal of benefit to us. This will depend on what you are spending the money on. It can be wise to look at ways to reduce our borrowing when we are perhaps not using the money for the most sensible of purchases. There are different ways that we can do this.
Try to reduce spending on luxury items
It is so easy to buy a lot more things than we need. It is not really our fault either as advertising leads us to believe that having lots of things will make us happier and so we can easily believe that. There can also be pressure from others to keep our homes looking a certain way, to dress a certain way and to own certain books, films, music and games, for example. Therefore, we can be spending a lot more money on things than we need to without really realising that we are spending unnecessarily.
It can be easier to cut down in this area than you think. Just asking yourself whether you really need something before you buy it can make you much more aware of what you are buying and make you think about why you are buying it. You may also find that if you compare prices between different retailer or slightly different items you may be able to buy things that you want without having to spend so much money.
Use your savings to pay off loans
If you already have loans then you may be trying to pay them off as soon as you can. This can seem like a daunting task but if you have some savings then you might be better off using them to pay off the debt. Often the interest on the debt is higher than any interest that you will receive on savings, although you will need to check this. You may feel worried about using savings to pay off a loan, but it can make a lot of sense. The loan will be paid off more quickly and this will save you money. You will no longer be paying interest on the loan and therefore will have that money available to put in your savings. You should soon be able to top up your savings account again and you will be free of that loan as well. If you worry that you will need money in the meantime and not have your savings to fall back on then you may need to be really careful with spending for a while. If you have an overdraft or credit card then you could use those in an emergency, but hopefully you would be able to be careful enough to manage without them.
Use spare money to overpay loans
If you have loans you will probably be paying back a bit each month. You may have a set repayment or just be repaying the interest, depending on the arrangement that you have with the lender. If you have spare money each month it can be wise to use it to overpay some of the loans. This means to pay back more than the minimum. Some lenders will be more flexible with this than others. It is worth finding out whether you can do this and if there is a fee associated with this. If you have a credit card, for example, you can usually decide how much you pay and can make additional payments at any time.
Even if you are making small repayments it can make a difference in the long run. Every repayment will reduce the interest charged and therefore make the loan cheaper and will end up meaning that it will be repaid more quickly.
Compare all prices when shopping
If you spend less money then you will have more money available to be able to pay back your loans. By comparing prices on the things that you buy you will be able to see what cheaper items are available and hopefully find some that offer good value for money that will save you some money. This can apply to everything that you buy, not just when you are in the shops but when you are buying insurance, utilities, fuel, transport and things like this as well. Then you will be able to use that money you save to help you to not get into further debt and hopefully to pay off some of the debt that you have accumulated.