A Resolution Worth Keeping: Stop Paying Interest

by Ron Haynes

New Year’s Resolutions are notorious for being kept … for about 6 days. But there are several resolutions worth keeping this new year. One of them really should be to eliminate any type of account that causes you to pay interest … if at all possible.

According to several experts I heard on a talk show recently, there are four types of accounts that suck the interest right out of your bank account. They are:

  • interest-rate High Interest rate credit cards
  • Mortgages
  • Car loans
  • Student loans

This isn’t going to be a “good debt vs bad debt” article. This is a “let’s get some budget breathing room” article. I frankly don’t care whether you think one debt is okay and another isn’t. It’s your life and your money. But personally, I’d rather be on the receiving end of interest than the paying end any day, but that’s tomorrow’s article. :)

The EASIEST way to reduce your credit card interest

If you can qualify for it (and it’s worth it to try), the Discover® More Card – 24 Month Promotional Balance Transfer is an OUTSTANDING way to transfer over your high interest credit accounts and pay 24 months worth of principle rather than 24 months of interest. Their offer expires on February 28, 2010 so you have a very limited amount of time to get in on this great deal.

But before you take the plunge with either, make sure you know the facts about 0% intro interest rate credit cards.

The EASIEST way to reduce your mortgage interest

I reduced my mortgage interest by going online and getting quotes from and Mortgage Search 123 after getting my free credit score. My wife and I were able to reduce our interest rate by a full one and a half points after we refinanced our home and it saved me a large chunk of change in two ways:

  1. I reduced my interest rate and payment
  2. I was able to eliminate private mortgage insurance. It was costing me $91/month! That’s an additional $1,092 (after taxes) in my pocket each year.

The EASIEST way to reduce your car loan interest

See if you can refinance that as well. Companies like MoneyAisle.com are good sources to help you refinance that vehicle and get into a payment that will give you some much needed breathing room.

If you’re stuck in a car lease, don’t worry, you still have options too! Try companies like SwapALease.com will connect you to a buyer who, for an incentive, will take over your car lease, allowing you to walk away with no liability and no penalties or obligations. Before you list your car with a lease swap company, it is vitally important to check with your leasing company to see if they will allow this type of transfer.

What is the “incentive?” That would be a steep discount. How steep will depend on:

  1. Your car
  2. How much is remaining on your lease
  3. How many miles you have on it
  4. The interest rate of your lease

The EASIEST way to reduce your student loan interest

Student loans are generally pretty low interest loans anyway, so if you’re paying anything less than 8% you probably won’t find a much better deal than that. But, if you’re determined to reduce your student loan interest, try refinancing with your current lender or through a peer to peer lending site like Lending Club. Depending on your credit score, you could pay as low as 6.78%. Chances are it will be over a shorter period of time so your payment may actually go up but the total amount of interest you’ll pay will probably go down.

Poor people pay interest while rich people gather interest

The sooner you and I can switch over, the better off financially we will be.

About the author

Ron Haynes has written 1000 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.


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{ 2 comments }

Money Beagle

The problem with refinancing is that it can be cost prohibitive in a couple of ways. Our situation (and I’m sure this describes many) is that our 20% down payment from a few years ago has been wiped out by the decline in home values. This means that a re-finance would either involve us bringing a ton of money to the table to get back to the 20% threshold or start paying in PMI, which would negate any benefit of the re-fi. So, I think there are many people who would love to refinance and get a more favorable interest rate, but it’s simply out of reach.

Emily

If it doesn’t make sense from a money point of view, don’t do it! On the other hand, if it does make sense, do. My home has actually increase in value since we bought it 5 years ago, enough to the point that my husband and I decided to refinance late last year when rates dipped. It was a great decision for us.

It was a great decision for my sister too. She and her husband had bought a home with a 7 year balloon payment due later this year. She also used Lending Tree and got a fabulous rate on a 15 year fixed mortgage.

My advice is to at least LOOK for ways to reduce the amount of interest you’re paying. Don’t just assume you can’t do it, even if your home has declined in value.

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