Friday, 20 September 2013

Redundant Credit (1)


‘In [Jerusalem] they take bribes to shed blood; you take interest and profit and make gain of your neighbours by extortion; but me you have forgotten’, declares the Lord God. ‘Behold, I strike my hand at the dishonest gain that you have made, and at the blood that has been in your midst…’

Ezekiel 22:12-13

As I explained last weekend, across most of the ancient world taking interest on a loan was considered criminal: it was, put bluntly, ‘dishonest gain’! But today, in most parts of the world, it is an established business practice.

Beware of paying interest on redundant credit – that is, credit where you no longer use what you bought. If you buy a television or music centre, you might want to repay the loan over one or two years because you should be using them for that long but if put cinema tickets or a restaurant meal on your credit card, repay it at the first opportunity because you have had all the pleasure you can from the purchase!

The following action plan can help you to save money by reducing your dependence on credit.

  • Make a list of everything you owe and, for each amount, the minimum repayment you need to make.
  • Work out how expensive each of your credit commitments is. For example, the APR on a credit card is probably much higher than on a personal loan or overdraft.
  • List all your commitments in order of cost, from the most expensive to the cheapest.
  • Your budget should already include all the minimum credit repayments you have to make. Now rework your budget to see what money you can free up to repay the most expensive credit as fast as possible.
I will conclude this plan for clearing redundant credit tomorrow.


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