Paying off your debts can mean the difference between being stuck in a financial rut and being financially free.

In this article we take a look at what it takes to change your view towards money, strategies you can use to repay your debt and the various options available to assist you if you're struggling to repay all of your debt in New Zealand. 

To become financially free you must exercise discipline by sticking to a budget, prioritising debt repayments and making a commitment to not take on any new debt, no matter how badly you may want to.

Invest in financial education & shift your perspective

Never take on credit without ensuring affordability

Perhaps you would like to apply for a loan but first, you would like to see if your loan will get approved. Would you like to see if you could afford to pay off your loans? If so then hang around and continue to read and we’ll help you get the answers that you need.

Your ability to repay will help you to determine whether or not you can afford your loan and what loan amount you would qualify for. Knowing your financial position is important when making financial decisions.

You will only be approved for the loan amount that you qualify for and you should not apply for a loan amount larger than what you can afford. This will result in your loan not being approved and this may also affect your credit rating negatively.

You can find the perfect loan with competitive fees and interest rates that will help you reach financial freedom. Ensure that you make an informed choice and you should reap the rewards of financing that works for you and your budget.

Get answers to your questions about money

You cannot change the things that you are not aware of, which is why doing research and putting a strong plan of action together is critical.

Making informed financial choices starts with asking the right questions. What is my credit rating? What is my credit score? What loan amount can I afford? What repayment term is best for me? These are all important questions to ask when you are applying for any form of financing be it a short-term loan or a mortgage.

From reading books about money management to attending short courses and doing online research, educating yourself on money and wealth will serve you for the rest of your life and help you get out of debt and eventually upgrade from average to wealthy.

If you do not have the time or the interest to go out and educate yourself on money then it may be best to seek the assistance and guidance of a financial planner. These experts can help you structure a budget, make investments and stay ahead of your finances both in the short and long term.

Create a strict budget that prioritises debt repayment

If your goal is to pay off your debts in New Zealand, then you need to create a personal budget and stick to it. Creating a budget is a fairly straightforward task that involves listing your projected monthly income and expenses and shifting amounts until you settle on a plan that will ensure you meet your financial goals.

Since your priority is to repay debt you should ensure that you take money away from luxury and entertainment categories and put these Dollars toward repaying debt. It is however important that you don’t make early repayments on loans and credit products that carry with them early repayment penalties.

There are other ways to ensure you become debt-free faster. By paying extra on your loan you can save money on interest and become debt-free quicker. If simply cut down on luxuries you can use this money to pay your loan off sooner and reduce your debt in the fastest time possible.

Good vs bad debt

Understanding the difference between good and bad debt can help you stay away from any debts that will harm your financial health and steer you towards good debt that will help you generate and build wealth.

Bad debts are generally any consumer debts like short-term loans, credit cards, store accounts and any personal loans. These forms of credit do not serve you in the long run but merely put you in debt and force you to make payment after payment for many months to come without generating any income.

Good debts are debts that help you accumulate assets. This is generally a home loan if you’re buying an investment property but can be any form of credit that lets you purchase an asset. This can be stocks and bonds as well as property and shares in a business.

5 Expert tips to save money & make extra payments toward debt

  1. Cancel memberships, policies and contracts that you don’t use or need: this includes things such as gym memberships, rewards programmes, golf club memberships, telephone and internet extras, insurance policies, expensive phone contracts and so on. These things may seem affordable on their own but when you add up the annual costs as well and weigh them up against any benefits you receive you may be in for the surprise of your life!
  2. Downgrade banking services and accounts: if you’re a high earner or have accepted any upgrades from your bank, you may find that your new plan is much more expensive but that you don’t even need or use any of the features it provides. If this is the case, consider downgrading to save on monthly bank charges.
  3. Refinance loans and move savings: this tip will take a little research but may be well worth the time! If you have had personal loans or credit cards for a long time you may find that you can get a better rate from another provider or product that did not exist when you took out your loan initially. In addition, if you have any savings you can shop around to see what new savings accounts have been introduced on the market and if these offer better interest rates.
  4. Cut down on luxury spending: whether it’s a new cellphone, a new outfit or the fancy coffee you buy on your way to work in the mornings, cutting out unnecessary spending can save you thousands of Dollars. This does not have to be a permanent change but once you start seeing the difference it will make to your finances you may decide that it should be!
  5. Downgrade your lifestyle: living above your means is a sure-fire way to land in big financial trouble in the long run. If you’re living in a big house, driving an expensive car, shopping at luxury stores and are starting to rely more and more on credit to make it through the month it’s time to downgrade your lifestyle and start rebuilding your finances.

If you don’t have any extra money to put toward debt repayment you can look at ways to earn extra income. This will ensure you are able to make all the necessary debt repayments and will also help you avoid having to take out other loans and further place yourself in debt.

Use savings & extra income to repay debt

Savings will earn you a lower interest per month than what you will be charged on loans and credit balances. This is particularly true for high interest debt like retail cards and credit cards. If you currently have any savings, it may be wise to use some, not necessarily all, of your savings to repay such debts.

In addition, any extra income earned should be put towards repaying debt rather than making unnecessary purchases or financing an unsustainable lifestyle.

Alternative ways to help you get rid of your debts in New Zealand

Do you feel that it’s time to get your debt under control? Would you like to know how to become debt-free? Wouldn’t it be a great feeling to get your debt paid off or perhaps just get a handle on your finances? If you answered yes to any of the above then continue to read and we will point you in the right direction.

Depending on whether you choose debt review, debt counselling or debt consolidation, there are some terms and conditions that are unique to each loan type that you need to know. Ensure you are familiar with these loan conditions before choosing a lender and loan type.

Repay your high-interest or low balance loans off first

A good strategy to help you get out of debt fast is to repay either your high-interest debts off first or to repay the loans that have the lowest balances off first.

Repaying the high-interest debt makes the most sense because settling those means you will no longer be charged interest on the outstanding balances. This is the most ideal way to go about things but, if you high-interest debts amount to thousands of Dollars, this will not be very motivating as it will take you a long time to bring these balances down or clear them.

This is why the second option of repaying the loans and credit balances that are the lowest is so popular. With this option you pay off the low balance loans in order to reduce the number of loans you have and give yourself the motivation to keep on paying off your debt.

Consolidating your debt

Becoming debt-free by consolidating is not impossible and with the right lenders backing you, you are able to get your debt under control and better manage your finances.

There are many lenders that offer debt consolidation loans. A loan type specifically designed to combine debt into one, monthly debt repayment. This allows consumers to get rid of their debt, get lower interest rates and have a larger disposable income.

Debt consolidation is ideal for those who have many small, high interest debts and are struggling to manage these debts. Larger loans such as your home loan and car loans should not be considered for debt consolidation.

Debt counselling services

Debt counselling is for you if you have become completely overwhelmed with debt and can no longer afford the repayments. A debt counsellor will assess your financial situation and put together a plan of action to help you become debt free.

This will involve contacting your creditors to arrange alternative repayments and repaying your debts for you on a monthly basis. This is one of the more drastic solutions and should only be considered if you have no other viable options.

Why choose debt counselling in New Zealand?

If you have too much debt and are struggling to keep afloat, taking on more debt will certainly make the situation worse. Instead of taking out more credit it may be time to consider debt counselling or debt review services in New Zealand.

There are countless companies that offer a range of different credit facilities from personal loans and quick payday loans to car loans and home loans. However, what some consumers might not know is that there are reputable companies that can help you with all your debt counselling and debt consolidation needs.

Getting the best advice for serious debt problems

Debt counselling companies are the professionals when it comes to helping consumers become debt-free and improve their financial management skills.

To achieve a healthy credit rating, a debt counselling company helps you by allocating funds to your debt while improving your immediate cash-flow situation. Debt counselling is often recommended for individuals who are heavily indebted and are unable to keep to their debt repayment commitments.

Let an expert answer your debt questions

Debt consolidation and counselling companies can give you factual advice on any of the financial problems or queries. Companies that are deal with debt review or consolidation are licensed to give individuals advice and to help consumers regain financial control.

Debt counselling is also often used by consumers who face repossession of the assets they used to secure loans or other credit facilities.

Failure to make repayments on secured credit facilities, allows the respective lender to make a claim on your assets that you have offered as collateral. This is an important piece of information to consider when applying for any secured loan type.

Free debt management is easy to find

Many debt counselling or debt consolidation companies will offer you a free debt management service. This is advisable as it helps you to better control your finances and in doing so, it improves your financial status. Take advantage of services like this especially if you find that your debt is as a result of poor financial management.

Regaining financial control takes time

Debt counselling companies understand that it takes time to become debt-free. They have all the knowledge and skills to create a financial plan that suits your individual financial situation. This plan will be the framework of what ultimately helps you regain financial independence. Having financial freedom helps to take the burden off you and your family.

Applying for debt services that suit you

Using a loan comparison site is the easiest way to find a debt counselling company that will work for your unique financial situation and needs. Compare companies and find the financial assistance that you need to regain financial control and move forward. All you have to do is ask the companies to contact you back either by email or by phone call it is up to you how you would like to have your communication sent back to you.

Debt review and debt consolidation does require financial adjustments, sacrifices, financial planning and budgeting. But it all helps you regain your financial independence.

If you feel you are drowning in debt with no disposable income at hand, contact a debt review company to assist you with moving past this financial hurdle. Getting the help you need when you apply for debt review or debt consolidation means that you will gain knowledge on how to save and keep yourself debt-free.

How long will it take for me to become debt free?

The length of time that it will take for you to become debt free will depend on the level of debt that you have amassed as well as your ability to make extra repayments and avoid getting into any new debt.

You will only be in debt for the amount of time that you have to pay your debt off or until your loan term is up. If you can come up with a way to pay your debt off sooner or your loan off sooner, if you can afford it, then you will become debt free faster.

If you make major lifestyle changes and reduce your spending by 50%, you will be able to pay off your debt in half the duration of your longest loan term.

This means that if your longest standing debt is a personal loan with a 24 month repayment term, you can repay this in 12 months. This means that you can become debt free in just a year simply by cutting down and making debt repayment a priority in your life.

In order to accurately determine how long it will take you to become debt free you need to sit down and list all of your debts as well as the interest rates on each, their loan term and annual fees. This will then give you a clear picture on how long you’re going to be in debt for, if you make only the minimum payments on each.

A debt-free life is a stress-free life

Each loan type has different requirements but all this information is easily accessible online. An online loan comparison site is the easiest way to get all the information you need on reputable lenders and loan options that are best suited to your individual financial requirements.