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3 Tips on How to Reduce your Interest Payments

3 Tips to Reduce your Interest Payments

Author: Bradley Abbott


“Pay off your debt first. Freedom from debt is worth more than any amount you can earn.”  Mark Cuban

Interest, that ugly thing we dread having to pay whilst the banks rake in the million-dollar profits…

However, we don’t always have to be on the receiving end of bank interest rates and having to dig deep into wages just to make the minimum repayment.

In an ideal world we could just say: you can avoid paying interest by not applying for credit or a loan, or if you do, get the least amount necessary – but that is not always the case.


Implementing these 3 tips can put you on the path to reducing your interest payable and providing a manageable strategy to paying down your debts, giving you peace-of-mind for the future:

1. Which debt first?

To maximise your long-term cashflow, paying out the debt with the highest interest rate first is typically the better strategy to adopt. By reducing the base debt incurring higher interest rate, you consequently pay less interest sooner and start to make greater steps towards being debt-free.

If you have multiple debts, maintain the minimum repayment on the remaining and focus on directing your surplus income on the debt with the higher interest rate. Once your first debt is paid out, turn your attention to the debt with the next highest interest rate, and so on.

2. Do your research

An option with credit card debt is to shop around for a new 0% interest-free card and apply for what is called a “balance transfer”. Ideally, this card should come with no annual fee – to sweeten the deal. Employing this strategy effectively means that you can rollover your outstanding balance from your existing credit provider to a new credit provider and capitalise on the period where no interest is payable, therefore, helping you to eliminate that debt a little bit easier.

The big rule with this tip is: you must close your existing card once the balance is transferred! Otherwise, you have now found yourself with another credit card and more debt.

3. Make your savings work for you

My final tip is for those with a mortgage. Many loan products now offer the option of attaching an offset account to your mortgage. The trick is to hold as much surplus cash as possible in this offset account because it will reduce the interest payable on your mortgage.

For example, if your mortgage is $300,000 and you have $50,000 of savings sitting in your offset account, you will only pay interest on $250,000 ($300,000 Mortgage – $50,000 Savings), which over the course of the loan will save you interest and potentially reduce your loan term.

If you don’t know where to start, you could seek advice from a qualified mortgage broker e.g. Fortuity Lending to assist you in sourcing a suitable loan product at a competitive interest rate to help you achieve your goals.


We can’t create more money out of thin air, but we can be smarter with how we use it.

If you are ready to break free from the debt cycle and want to create your best life, our dedicated team of experienced Financial Advisers can provide you with Debt Repayment and Cashflow Management Strategies so you can get back to focusing on what matters most.

Take the first step by booking a complimentary financial planning meeting with Newcastle Financial Planning Group today.


DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.

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