The 50 basis points increase to 1.75% will be the largest interest rate in 27 years and will speed up a historic tightening of monetary policy to tackle the highest level of inflation experienced in four decades.
In June, inflation reached 9.4%, with the BoE predicting it will rise again to 11% before the year ends.
In a comment, BoE governor Andrew Bailey said, “The Committee will be particularly alert to indications of more persistent inflationary pressures, and will, if necessary, act forcefully in response. Bringing inflation back down to the 2% target sustainably is our job, no ifs or buts.”
The BoE has already raised interest rates on five occasions in the past seven months — a record amount that is putting substantial pressure on people who have borrowed funds.
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Inflation is rising at its fastest rate in 40 years, and this has led to interest rates hitting their highest level in 13 years at 1.25 per cent – as of July 2022. It is widely understood that the increase in money supply during lockdown coupled with skyrocketing energy and fuel prices have been the main contributors to the current levels of inflation. Both of these factors have hurt business growth this year. Below, we explore how these factors affect businesses.
Interest rates
Interest rates refer to the amount a borrower is charged for borrowing a sum of money. When they rise, businesses will find it difficult. Consumers will have to pay more money on their debt in these situations, which usually leads to them having less disposable income. As a result, your business might find it harder to sell your products or services – especially if you deal in luxury goods. Naturally, if interest rates fall, businesses will discover that customers can spend more. The other issue with rising interest rates is that they make it harder for businesses to acquire loans, which in turn impacts how much they might invest in new ideas and projects. It’ll make any loan you take out more expensive and it’ll typically take longer to pay back, which in turn makes individuals and organisations think twice about their long-term outlook.
Inflation
Inflation can also impact businesses negatively. It refers to the rise in the cost of goods: if inflation occurs slowly, it can be good for business as it encourages consumers to spend in the present. However, sharp inflation can hurt businesses. When inflation soars, the cost of living rises, and employees will ask for higher wages to help them afford essentials. As such, businesses will have to pay higher salaries. But it also affects supply chains too. Businesses will have to pay more for the raw goods needed to make their products or carry out their services. When all of these impacts are combined, businesses will find that they’re spending significantly more money each month.
What steps are businesses taking to cut costs?
When interest rates and inflation rise, businesses usually have to take steps to cut costs. For instance, if a business is interested in purchasing a fleet of vehicles, it’ll look through car lease deals rather than making outright purchases. However, if more dramatic cuts are needed, a business might make the unenviable decision to lay off some of its workforce. This decision can damage the reputation of a company and limit future growth as the business downscales. It’s a tough decision that’s usually made when other, less drastic, cuts have been made without success.
Rising interest rates can create a difficult financial period to navigate. Consumers will find it hard to make ends meet each month, while businesses will see their revenue fall. But by taking sensible steps to cut costs and find innovative ways to increase revenue, your business can survive and thrive in the future.
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In June, Federal Reserve officials highlighted the need to tackle inflation, even if it came at the cost of slowing the economy amid the looming threat of recession. They said that the US central bank’s July meeting would likely see another 50 or 75 basis point move on top of a 75 basis point increase that was approved in June.
“In discussing potential policy actions at upcoming meetings, participants continued to anticipate that ongoing increases in the target range for the federal funds rate would be appropriate to achieve the Committee's objectives,” the minutes read.
“In particular, participants judged that an increase of 50 or 75 basis points would likely be appropriate at the next meeting. Participants concurred that the economic outlook warranted moving to a restrictive stance of policy, and they recognised the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist.”
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The recent Ukraine war has been the touchpaper for a multi-national cost of living crisis that had in fact been some time in the making. COVID-19, commodity prices and the environmental imperative, to name but three factors, have coincided to push prices of goods and services across the board to all-time highs. The result has been a surge in inflation, with the UK alone now hitting 9% in April.
Just as it was with the pandemic, the question on everyone’s lips is ‘when will this be over?’. Key institutions are scrambling to respond, and governments are introducing short-term, palliative measures in the hope of staving off recession. But the true answer may be that increased prices are here for good. It may be that the world needs to adjust to new realities in the way we buy and live. But what are the key costs causing this crisis for consumers, and how are they likely to change over time?
Energy
The first major culprit in the cost of living crisis is energy. This increase was underway well before the recent war, as wholesale prices had steadily risen in response to increased global demand, and the push towards greener but more expensive energy production.
These factors are here to stay, and while we may see a stabilising over the next two-three years, a return to previous levels is highly unlikely – and that means a new and more challenging ‘normal’ for consumers. This gloomy prognosis is even more likely for Europeans, now deprived of Russian energy sources that will continue to be shut off or severely curtailed for the foreseeable future.
Food
Next comes food. Myriad factors are driving up shopping basket prices, but at the highest level, changing weather patterns around the world are responsible for significant disruption in the way the world farms and produces. Critical foodstuffs have been massively affected by atypical weather events over the past few years. Supply chain disruption caused by COVID-19 is another major contributor, with factories and logistics facilities having to limit and re-configure labour usage to limit the spread of infection. Finally, the drive towards sustainability has seen great increases in production costs, as the world increasingly demands that food is produced in a greener way and under improved labour and animal welfare conditions.
All of these are long-term factors - adjusting to changing weather patterns, for example, could take the world decades to solve, and environmental concerns are unquestionably here to stay. Again, prices may stabilise in the medium term, but a return to previous levels is almost out of the question.
Interest rates
Many central banks, including in the UK and the US, are raising interest rates in an attempt to combat inflation. But while those with savings may benefit, the result is also a significant increase in the cost of consumer borrowing. Mortgage rates are going up, as is the cost of credit at just the time when consumers are having to rely on it more than ever.
These actions could potentially be reversed in the medium term. If inflation can be stabilised, governments might in 2-3 years be in a position to reduce rates once more – but that ray of hope is dependent on a host of other factors in the wider economy.
The value of financial understanding
It seems almost certain that a higher cost of living is here to stay. But that doesn’t mean there’s nothing we can do about it.
W1TTY is a young finance brand with a growing customer base amongst students and young people. As quickly as we’re taking off, we’re also acutely aware of what our customers are facing in managing their finances as the cost of living crisis continues.
In-depth educational services are needed right now to help young people deal with these issues. With so many facing a tougher challenge in balancing their budgets, it’s never been more important that they’re equipped with the understanding, know-how and responsible signposting that will help them to make prudent decisions about their money.
Young people deserve to have bright financial futures. Through a combination of loyalty and reward schemes, gamified learning and personalised features, W1TTY is about empowering our customers with accessible, engaging education and saving incentives. By doing so, it’s our aim that we can help insulate them from some of the worst impacts of the current crisis.
About the author: Ammar Kutait is the CEO and Founder of W1TTY.
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And with RBI increasing the repo rate by 40 basis points, prepaying your PNB home loan seems the most convenient thing to do. But is it? Read on to find out how to manage your home loan and the long-term effects of prepayment.
Impact Of Rising Interest Rates On Loan Repayment
PNB Housing offers home loans at floating interest rates linked to its benchmark interest rate, PNBHFR. The prevailing market conditions again influence this benchmark rate.
Therefore, an increase in repo rate may have the effect of increasing your home loan interest rates. In such cases, you will have to increase your EMI or tenure to meet the additional financial obligation.
Both the cases will result in more interest payment. However, your interest outgo will be much higher if you increase your tenure while keeping the same EMI. One way to reduce the impact of an interest rate hike on your loan is loan prepayment.
Prepayment Options When Interest Rate Rises
In case of a rise in interest rate, partly prepaying your loans can help you avoid the extra interest outgo during the loan term.
You can readjust your PNB home loan liability with partial prepayment in different ways. One option is keeping EMI the same with prepayment, and the second is to keep tenure the same with prepayment. Let's look at the impact of both these options.
Keeping The Same EMI
You can ask your lender to calculate the prepayment required to keep your EMI the same even with the new interest rate. You will also notice a reduction in tenure if you opt for this option.
Keeping The Same Tenure
Suppose you want to repay the total interest equal to the original loan amount within the same tenure. In that case, you should be ready with a higher prepayment than in the first option. However, you will get the benefit of the reduction in EMI size.
Is There Any Charge On PNB Home Loan Prepayment?
PNB does not charge any fee for prepayment of loans sanctioned on floating rate of interest. Hence, you can partly or fully prepay your loan at any stage without worrying about charges if you have extra funds available with you.
There are no charges for a fixed-rate loan if you prepay the loan from your sources. However, PNB will charge 2% for shifting your house loan account to other banks or financial institutions.
When To Go For Prepayments
A benefit of home loans is that it helps you save tax on both interest and principal repayment. This can be a great respite, especially for people in higher tax brackets. However, the benefit is limited to Rs 2 lakhs of interest payment per financial year. Any payment of interest above the stipulated amount does not attract tax benefits.
So if you have a high ticket loan with significant interests, it makes sense to make partial prepayments to bring down the outstanding balance to an optimum level. This way, you can make most of the tax benefits.
When Not To Go For Prepayments
If your loan is of less amount and you prefer tax saving, you need not rush for prepayment. Also, if you and your spouse are both enjoying tax benefits separately, you can continue the loan amount even if it's bigger.
Besides, you may generate higher returns in the market by investing your surplus amount in high-return investments like equities. If you have a high-risk appetite, you may be better off investing than prepaying your home loan. But take this route only if your income and cash flows are not under stress and your home loan interest rate is not unusually high.
Final Words
Being debt-free may be blissful but also a difficult feat to achieve. Hence, it's necessary to strike a balance before rushing into anything. Ensure that you have proper emergency funds and health insurance to cover you during distress before making a prepayment. Given the market's job uncertainty, experts advise saving at least one year's expense in the emergency corpus. The remaining balance can go towards prepaying your PNB home loan.
Applications for mortgages for home purchases dropped 1% last week compared with the previous week, according to data from the Mortgage Bankers Association (MBA). Volume was 14% lower than the same week of 2021.
“Mortgage rates fell for the fourth time in five weeks, as concerns of weaker economic growth and the recent stock market sell-off drove Treasury yields lower,” commented Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Mortgage applications decreased to its lowest level since December 2018, as the purchase market continues to struggle with supply and affordability challenges.”
Rising interest rates in the US, as well as steep gains in house prices, are having a heavy impact on affordability. However, while prices continue to rise due to limited market supply, different types of property buyers are having very different experiences.
“Demand is high at the upper end of the market, and the supply and affordability challenges are not as detrimental to these borrowers as they are to first-time buyers,” Kan explained.
The Bank of England’s policymakers are expected to increase interest rates from 0.75% to 1% — a level not seen since 2009. The central bank will also increase its forecasts for inflation as the cost of living crisis continues to spiral amid the ongoing Russia-Ukraine conflict.
At its past three meetings, the Monetary Policy Committee (MPC) already upped rates in a bid to rein in inflation, which reached a 30-year high of 7% in March.
The cost of living crisis is predicted to worsen again later this year when the energy price cap will be further revised. There are warnings that inflation could hit 9%, or even double digits, in the autumn.
In March, the Bank of England said, ‘If sustained, the latest rise in energy futures prices means that Ofgem’s utility price caps could again be substantially higher when they are reset in October 2022. This could temporarily push CPI inflation around the end of this year above the level projected for April, which was previously expected to be the peak.”
Across Europe after weeks of bad news, stocks rose in anticipation that the US Federal Reserve will make a change to their current policy and raise interest rates. Markets in Europe have reacted positively with the FTSE 100 rising 1.3% in London after opening, while over in France and Germany both the CAC and the DAX gains exceeded 2% (2.1% and 2% respectively).
A raise from the US Federal reserve would mark its first interest rate rise for over 4 years following calls to take steps to ease the current inflation issues in the US which has largely been attributed to ongoing global issues from the COVID-19 pandemic to the current Russian invasion of Ukraine.
Given those volatilities, the Fed isn’t expected to make dramatic and long-lasting changes, but it’s widely expected that rates will rise. However, analysts have warned that should the Fed not make changes, markets should expect to see continued fluctuations.
There is also some potential further good news as Ukrainian President Volodymyr Zelensky has hinted at positive moods during the latest round of negotiations with their Russian counterparts giving markets fresh hope that an end to a conflict that has already resulted in turmoil may be a step closer to a conclusion.
Will Russia Make Payment?
Part of the reason for the positive mood in the talks appears to be that Russia is beginning to feel the pinch of the large package of sanctions placed on them and movements from several major economies that may see them lose their seat at the energy supply table. There has been talk of Russia defaulting on a bond payment which has raised questions that despite loud proclamations of defiance from the Kremlin about their financial autonomy, all might not be as well as the official statements suggest.
With a $117m (£90m) interest payment due on a US dollar bond, Russia has said it will pay, but it will pay in roubles. If they do and unless they make the additional payments within 30 days, they will likely default - raising more questions about the state of the Russian economy. This would mark a dramatic turnaround for the country given that only a short while ago its credit rating was seen as one of the most secure globally.
US and Asia Rebounding
The plight of the Russian economy appears to be at odds with the news of both the European markets rebounding, and it seems the US and Asia are seeing positive signs. The US has seen the S&P (0.9%), Dow (0.7%) and the Nasdaq (1.3%) all make gains ahead of a predicted 0.4% rise in US retail sales following a poor December.
In Asia, news from Beijing that there were policies incoming to stimulate the financial markets with new economic boosts saw the markets rise across the continent with Japan’s Nikkei climbing 1.6%, the Shanghai Composite climbing 3.5% while in Hong Kong, the Hang Seng rose dramatically, soaring more than 9%.
For now, as the market volatility continues, it remains all eyes on the US Federal Reserve and the talks in Russia.
Understanding the relative strength of currencies is a way to understand which pairs are bullish or bearish, confirm the pairs you want to trade, and the best time to trade a pair. In forex trading, currency strength is one of the main determinants of the value of currency pairs and can be used by short-term traders to develop news trading strategies.
Since the currency strength of a pair can increase or decrease depending on the factors affecting such currencies, traders need to have good knowledge of what relative currency strength is and how to calculate it.
What Is Relative Currency Strength?
Relative currency strength is the purchasing power of a currency when traded against other foreign currencies or used to trade products. It is also a technical indicator used in technical analysis by forex traders to chart the historical and current strength or weakness of currency pairs based on the recent trading periods.
There are about 27 currency pairs traded in the forex market, with 7 of them being the major currency pairs. These pairs are chosen because they are economically stable and demand insufficient qualities. However, with so many currencies available for traders, it can be difficult to choose which is most beneficial to trade and that is where relative strength comes into play.
Why Are Currency Strengths Compared?
The forex market is unique because it involves trading two markets together which is not done in the stock market or any other financial environment. When a trader is looking at a chart, they cannot determine which of the currencies is stronger or weaker based on the upward or downward movement of the chart. If they cannot determine which currency is stronger, it affects their ability to buy, sell and make a profit from the currency pairs. To solve this, there needs to be a way formulated to measure which market is strongest, the currency you need to buy or sell, and to avoid trading the wrong markets.
Currency strength helps you to understand the value of one currency as it relates to another and what trend you should look out for when making a trade. For instance, if you do not find opposing markets in a currency pair, then you know that you are trading the wrong pair and where there is sufficient distance in a currency pair with one moving higher than the other, then that is the best time to sell the weaker currency and buy the stronger one.
Factors That Can Affect The Relative Strength Of A Currency
Forex trading can be complicated due to the different variables affecting the strength of such currency. This can affect the ability of a trader to trade such currency as it determines whether the currency should be bought or should reduce losses and increase the potential for profits. Here are some factors that affect the strength of a currency:
Interest Rates
This is one of the first factors considered when evaluating the strength of a currency. Interest rates are the amount needed to borrow money and high-interest rates mean it would cost more to borrow a particular currency while lesser interest rates would encourage borrowing and can stimulate an economy.
In forex, understanding interest rates in relation to currency strength is advantageous as a trader can make a profit from the difference between the interest rate of two currencies. The higher the interest rates of a particular currency, the higher the demand for the currency, and currencies with lower interest rates experience lower demand. Buying higher interest rates increases the rate of return when the currency pairs are exchanged.
Inflation
While a small rise in inflation may be good for a currency, too much inflation affects the economy, and a government may try to stabilise the rising prices by increasing interest rates which in turn would strengthen a currency in the forex market.
Economic Policies/ Growth
Another major determinant of the strength of a currency is the economic policies made and the growth of such an economy. When the growth of an economy is high and stable, there will be an increased demand for such currency, and a downward slide in economic growth will reduce the demand for such currency and determine how a forex trader trades such currencies. Also, good monetary policies can strengthen a currency, thereby increasing its relevance and demand.
Stability Of The Currency
Forex traders are more likely to buy or sell relatively stable currencies, which is why the EUR/USD is one of the most traded currency pairs due to the stability of those currencies.
When a currency is plagued with problems such as large debts that cast uncertainty around the currency and make it unstable, the strength of such currency can become affected as it becomes unattractive to traders.
How Can You Compare The Relative Strength Of Currencies?
There are several ways you can compare the relative strength of currencies:
1. Currency Strength Meter
A currency strength meter is a technical tool that provides a graphical representation of the relative strength and weaknesses of all major currency pairs in the forex market.
A currency strength meter gives you the ability to find correlations among different currencies and gives you a confirmation regarding the one you want to trade. Also, most currency strength meters are free, which saves cost, and you can find a couple of good ones that provide accurate information regarding the currencies in question.
While you can use this technical tool as a way to check the strength of a currency, it doesn’t exactly tell you the best time to trade which is why it is combined with other tools used in technical analysis to determine the best entry and exit points to trade good currency pairs.
2. Look at the common currency (the US dollar)
The 7 major currency pairs are traded against the US dollar because it is one of the most stable currencies and is regarded as the standard for historical reasons. This is why an easy way to test the strength of your currency is to measure it against the US dollar using the US dollar index.
The US dollar index, commonly called DXY by traders measures the value of the USD against a basket of currencies. The currencies that make up this basket are the EUR, JPY, GBP, CAD, SEK, CHF, as they are some of the major currencies used by traders. The US dollar index or DXY is important to traders because they can gauge the strength of other tradable currencies in respect of the USD. The index rises if the dollar strengthens against the other currencies and falls when the dollar is weaker than the others which allows traders to hedge risks and make strategies in respect of the dollar (knowing which currency to buy or sell).
3. Check informative websites
Some websites can help you rank the performance or percentage movements of different currency pairs. Using these sites is a good way to study the historical and current trends of currencies to determine the strength of such currency but the downside is, it doesn’t tell you much about the optimal setup or which pair is the best to trade.
4. Currency strength matrix
The currency strength matrix is a market analysis tool made to analyse the strengths of the major currencies in the forex market based on the movements or trends of their pairs. Traders need to read charts to analyse the trends in the market but even the most successful traders are prone to making mistakes that can be very costly.
To eliminate the guesswork, reduce the risks faced by traders, and the possibility of losses, the strength currency matrix allows traders to spot bad trading pairs, create better strategies, and have a more proactive and focused approach towards trading.
How Do You Decide The Best Pair To Trade After Comparing Their Relative Strengths?
Comparing the relative strength of currencies allows you to recognise the direction of the trend and shows you the performance of a currency when compared to other currencies. You can take advantage of massive trends by pairing the strongest currency shown with one of the weaker currencies or the weakest one to increase the potential for profits.
Conclusion
Comparing the relative strength of currencies helps you discover the best currency pairs to trade and there are several ways to measure the strength of a currency. However, it is important to remember that it does not inform you of the best time to enter the market and you would need additional tools to determine the best entry and exit points to trade the currency pairs with the most potential.
Also, when using a tool like the currency strength meter, you can make small changes to utilise the different trading time frames.
The Monetary Policy Committee (MPC) voted by a majority to act amid pressure from the International Monetary Fund (IMF) who warned it against further delays. The MPC also voted to maintain the amount of quantitative easing at £895 billion.
According to recent data from the Office for National Statistics (ONS), inflation in the UK rocketed to its highest level in over a decade in November, climbing to 5.1%. This is a figure that comes in significantly higher than the Bank of England’s 2% target and notably above its 4.5% prediction, largely due to the rising cost of fuel, clothing, and second-hand vehicles.
"Bank staff expect inflation to remain around 5% through the majority of the winter period, and to peak at around 6% in April 2022, with that further increase accounted for predominantly by the lagged impact on utility bills of developments in wholesale gas prices," the Bank of England said.
The 5.1% figure, reported on Wednesday, sparked intrigue as to whether the Bank of England would hike interest rates despite the rapid spread of Omicron through the country. However, inflation hit a rate not expected by the Bank until spring 2022, seemingly outweighing concerns around the new coronavirus variant.
What Exactly Is An Unconventional Personal Loan?
Unconventional personal loans like the old school personal loan allow you to borrow a certain amount of money at a fixed interest rate. You will have to pay back the amount along with the interest within a decided time period. The money that you have borrowed from the lender can then be used for any personal reason including purchases, medical use, car purchasing, home repairing, etc.
But what is the difference between a traditional personal loan and an unconventional personal loan? There are two key factors you should take into consideration. Firstly, the lenders for this unconventional loan are not the usual lenders, they are usually marketplace lenders, private lenders or lenders backed by the government. Secondly, different factors are taken into consideration for qualifying for this loan. These different factors make those people eligible for the loan who otherwise would not qualify for the traditional loans.
What Are The Types Of Unconventional Loans?
Unconventional loans have been specifically designed to cater to people who have low or moderate-income, and people who are unable to pay big down payments for a house. They are usually backed by the government and require no or very low down payment with low-interest value. Here are the different types of unconventional loans you can get:
FHA
This type of loan allows you to buy a house with a very low down payment. The interest rate offered is low compared to the conventional value but some other amounts have to be paid. This program asks you to pay an insurance premium as an upfront value and a monthly fee as well apart from the monthly instalment of the loan. The credit score limit for its eligibility is lower as compared to conventional loans.
HUD Section 148
This program has been specifically designed for Native Americans with no minimum limit of credit scores. They are asked to pay an upfront value along with a monthly insurance fee. The interest rate is very low making it an easier option for a loan.
VA Home Loan
For you to be eligible to get this loan you need to be in service. This loan has been designed for military personnel and members of the National Guard to build up a home for their family. This loan allows you to purchase a home without any down payment. The only money that you have to give is the VA funding fee. Usually, there is no minimum credit score limit to get the loan.
USDA
This loan has been designed for people who are on a moderate or low income and are looking forward to purchasing a home in a USDA designated rural area. With this loan, you do not have to pay any down payment and get complete financing at a reasonable interest. You have to pay a guarantee fee which includes an upfront value and monthly insurance fees.
Why And When Is An Unconventional Personal Loan Beneficial?
An unconventional personal loan is the only way to get the best personal loan if you are not eligible to get a traditional bank loan. You can undergo situations in which you need money but you cannot qualify for conventional loans, in such situations unconventional is the best way to get a loan to suffice your needs.
Most of the unconventional loans come with no collateral. This means you do not have to have any personal belongings at risk to get the money. These unconventional loans come with no or very low down payment making it a very easy choice for the majority of low or moderate-income people. Having an unconventional loan can also improve your credit score as these unconventional lenders report about the loan activity to the credit bureaus which help to build up your loan history and improve your credit score.
Cons Of Unconventional Personal Loans
The biggest drawback associated with unconventional loans is that you cannot receive a huge cash sum. With this loan, you will be able to meet only limited expenses. If you are looking forward to getting a big house or making a big purchase, then this loan is not for you. Most of the unconventional lenders are online which means you cannot establish any relationship with the lender which sometimes is necessary to discuss your issues and requirements. Moreover, in most cases, you are not guaranteed the lowest APR.
In A Nutshell
An unconventional personal loan is a great opportunity for those who are looking forward to borrowing money but cannot meet the criterion of the conventional lenders. There are many pros associated with it and will be very beneficial for you. However, all is not good for an unconventional loan and you might have to look into it to get the best loan out of it.
Debt doesn't have to be a fact of life, although many people look at it that way. They assume that it's normal to owe money and may not even pay attention to how much they are paying in interest or how long the payments will take them at their present rate, which could be decades. Others might be struggling to keep up with their bills and wonder if they will ever be in a better financial situation. Wherever you are on this continuum, it is possible to pay off debt fast using the steps below.
Overhaul Your Finances
Your first step is to take a serious look at your finances and figure out how much is coming in, how much is going out, and how much you owe. For now, just make a list of your total debts, excluding your mortgage since it may be more beneficial to pay this one off over time. Now, review your spending and look for places where you could cut back. Dig deeper than simply cutting back on your entertainment budget or buying cheaper groceries.
For example, could you be paying less for car insurance? What about moving to a cheaper apartment or getting roommates? If you have looked at ways to cut back and not found many, you might need to consider taking on another part-time job or looking for a higher-paying one. Another option is gig work, which can mean anything from dog walking to computer programming and more and is easy to fit around your regular schedule.
Look at Your Debt
The next step is to look at ways to reduce your debt in addition to paying it off. For example, interest on your credit cards is probably very high. Rather than continuing to pay off a little each month, a better option might be to take out a personal loan from a private lender. You can check your estimated interest rate, and it is likely it will be lower than the credit card rate. You can then use the loan to pay off the credit card in full and then turn to paying off the loan at a lower rate.
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Have a Plan
Next, you should decide whether you would prefer to pay off your smallest debts first or those with the highest interest rates first. The latter is the more financially sound approach because you will end up paying less in the long run. However, some people find that the former method is more motivating. The main idea is for you to stick to your plan, so choose the one that is the most appealing to you.
Make a list of the debts in the order that you will focus on them. Whichever one you begin with, put the majority of your money set aside for these payments toward that. On everything else, simply make the minimum payment. When that first one is paid off, add what you were paying on it to the minimum payment on the second item on the list. As you proceed through the list, the payments you make on the main debt will grow larger.
