MARTIN LEWIS has revealed how to pay 0% interest on your loans and credit cards – which could help clear your debt quicker as well as save you money.
The consumer guru explained on his ITV show The Martin Lewis Money Show last night that you can get rid of pricey interest payments – or cut them close to 0% – in a “debt cost-cutting masterclass”.
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He covered how to do this for personal loan repayments, credit card or store card debts and overdrafts.
Personal loan repayments
He revealed four steps to cutting out interest rates on personal loan repayments, and said you first need to ask your current lender for a “settlement figure”.
This is where you ask your lender how much money you need to give to them as a lump sum to settle your remaining debt – which includes any early repayment penalties.
According to MoneySuperMarket, lenders can charge you up to two months worth of interest payments if you pay off your loan early.
Once your lender has given you this settlement figure, the second step Martin said you need to take is to find the cheapest new borrowing option.
This will be used to pay off your settlement figure.
Martin said not to apply for any new offer when you find it – he advised to use a loans eligibility calculator to find out if you’ll be able to take out the deal.
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MoneySavingExpert and Comparethemarket have tools to help you check this.
He said that if you are borrowing less than £3,000, you’ll tend to find that applying for a 0% money transfer credit card will usually be cheaper than getting a new loan.
These types of money transfer credit cards allow you to move over debts you already owe onto a new card, and you won’t pay interest on this amount for a set period.
It’s worth noting that only people with the best credit ratings will be accepted for the best deals though.
Once you’ve found out the cheapest borrowing option for you, you’ll then need need to find out what you have left to pay on your existing loan.
If the new loan is cheaper than the total left that you have to repay on your existing one, that’s the time to apply.
Martin said it is a “very good time” to try and get a cheaper deal, as interest rates are low but could rise later in the year.
Credit and store cards
Martin then revealed to viewers how you could clear your credit or store card debt – again, by cutting your interest payments to 0%.
He said you “can’t afford” to not check if you qualify for a 0% balance transfer card if you’re struggling to keep on top of these loans.
Again, you should use a loans eligibility calculator to see if you can apply for one.
Martin said some of the best deals to look into are from HSBC, where you can get a 0% interest free period of 20 months, and Sainsbury’s Bank, where this is up to 21 months – and there’s no fee to shift your debts onto the card.
He reminded Brits never to miss a minimum repayment, and make sure to clear your debt within the 0% interest free period.
And he warned viewers not to use this card to spend or withdraw cash, as you could be charged a higher rate for this.
Overdrafts
Next, Martin tackled overdrafts, which he has previously warned are a “danger debt”.
Martin earlier this month said its the “wrong place to carry your debt, because the interest rate you’ll pay on your overdraft is typically much higher than what you will pay your credit cards.
He once again urged viewers to tackle their overdraft in his show last night.
The annual interest rate you’ll pay on your overdraft typically stands at 40% – that’s much higher than that compared to that of a typical credit card which is usually 18%.
“Most people would be better of paying off their minimum [repayments] on their credit card and using their spare cash to reduce their overdraft,” he said.
He said there are ways you could switch banks and get a 0% overdraft.
Martin said First Direct, for example, is offering most customers a 0% overdraft up to £250, and you’ll get £130 cash bonus to switch over to them too.
While he said you could possibly get a 0% overdraft for a year at Nationwide, with a £100 cash switching offer on top too.
You can use the cash bonuses to help pay off the overdraft.
The consumer guru has also explained what you need to do now before the energy price cap is hiked next week.
He also explains how Martin Lewis explains how workers are missing out on FREE cash support.
Plus, he urges workers to check tax codes after one reader got a £5,000 refund.
Martin Lewis in tears after viewer reveals his tips helped her become debt free
