Debt Busting Tips

 Read more Oily Rag articles by Frank and Muriel Newman 

The newspapers are telling us mortgagee sales are happening in record numbers, and there is no doubt some are finding the going tough. The problem is usually a familiar one – too much debt and too little savings. For many people who want to live with the jingle of coins in their pocket and no or low debt, choosing to live off the smell of an oily rag is the answer!

For those struggling under the weight of a mortgage here are some debt-busting oily rag tips:

• Shirl from Napier has some very good advice for people whose fixed rate loans are maturing. She says, “Make the most of the recession – with interest rates for floating mortgages low at present, if you are able to keep paying the same amount you were before the interest rates dropped, you will end up paying the difference straight off your principle loan amount. You can save thousands of dollars in interest in the long run.”

• If you are locked into a fixed-rate loan that you would like to repay but don’t want to pay break fees (early repayment fees), all is not lost. Most banks allow part repayment of a loan without penalty. One reader from Whangarei had two fixed rate mortgages that had about a year to run until coming off the fixed rate of 9.5%. They had money available but were going to be stung many thousands of dollars on early repayment of the loans. After talking to their bank, they were able to increase their monthly repayments by $1,000 on each mortgage without incurring any penalties at all. Most banks offer this sort of arrangement and it’s a good way to make use of savings.

• Avoid the temptation to buy on tick. This applies especially to motor vehicles, furniture, clothes, holidays and hobbies. It’s bad enough that things like cars and household items lose value. Don’t add to your problems by paying interest as well.

• If you must borrow, make sure you get a good deal. Shop around – saving even 0.1% off your mortgage rate saves thousands of dollars over the life-time of the mortgage.

• Most cities have a free budget advisory service. They will give an unbiased opinion about financial contracts.

• If you have a mortgage, and other debt like hire purchase finance or credit card debts, look at the possibility of combining all of the debt into a single mortgage. Because mortgage money costs less than other debt, you may be able to cut heaps from your mortgage bill.

• Hire purchase is a no-no-no! If you can’t pay for it in cash you can’t afford it! Don’t be fooled by the temptations of easy credit. It is a very expensive way to buy stuff.

• Don’t guarantee other people’s debts.

• A retired oily ragger from Tauranga says they have a lot of fun entering free competitions. They reckon they do well winning cash and goods. All of the winnings are used for debt repayment.  

If you have money tips you would like to share then drop us a note via our website (www.oilyrag.co.nz) or write to Living off the Smell of an Oily Rag, PO Box 984, Whangarei.

* Frank and Muriel Newman are the authors of Living off the Smell of an Oily Rag in NZ. Readers can submit their oily rag tips on-line at www.oilyrag.co.nz. The book is available from bookstores and online at www.oilyrag.co.nz.