Credit card debt consolidation explained

Credit card debt consolidation

Credit card debt is easy to accumulate, can grow rapidly, and becomes challenging to keep on top of – especially if you have more than one credit card.

To help keep your finances under control and more manageable, many individuals and businesses look to consolidate their credit card debt into one monthly payment.

This is typically achieved by using a balance transfer offer, allowing you to move debt all to one low-interest credit card, by taking out a loan (either personal or consolidation), or by taking equity from your property.

We have a wide range of information on our website, visit our service pages online, and in this post, we explore credit card consolidation and how you can use small debt recovery techniques to manage your finances proactively.

Commercial Debt

Ways to consolidate your credit card debt include:

Credit card debt consolidation loans – when you opt for a consolidation or personal loan, the loan will be used to pay off all outstanding balances (your creditors). From here, you will then have only one monthly payment, which repays the loan amount over a set period of time. This solution provides you with more structured repayment plans and low interest rates. However, a good credit score is required to secure these low interest rates and get a good deal. There is also an upfront fee of 1%-8% of the loan amount.

Loans are a good option if you aren’t eligible for a balance transfer offer, allowing you to pay off your credit card debt sooner.

With consolidation and personal loans, we always advise you to check the loan terms and conditions carefully and understand the applicable interest charges that may be applied.

Debt consolidation credit card – the most popular option is to transfer the balance from one card to another credit card, where you can receive an introductory balance transfer offer with little to no interest charged for the first number of months – saving you hundreds, even thousands, of pounds and allowing you to reduce your debt quickly. All debts are in one place, and you have one monthly payment, making things more manageable.

Balance transfers come with transfer fees, but these are typically kept low to entice people to make the move (typically, balance transfer fees range from 3%-5%).

However, it’s important that you look into all balance transfer offers thoroughly and consider what you will do when the offer expires, i.e., will the balance be paid off? What is the interest at the end of the introductory period? Are there any hidden fees/hidden extras? You will also need to check that you are able to get a high enough balance transfer limit and be mindful that you are adding another credit card to the mix.

Also, transferring large amounts of debt to another card runs the risk of lowering your credit score temporarily, but as you keep making payments, it can bounce back.

Debt management plans – a structured repayment plan that provides affordable rates and reduced monthly payments. This is a viable option if you have a significant amount of debt and your credit rating is poor. A debt management company can negotiate lower interest rates and monthly payments on your behalf, which, when you make one monthly payment, is then distributed to your various creditors. Debt management plans last 3 to 5 years and can have upfront and ongoing fees; not all credit card companies will agree to a debt management plan.

Home equity – you can use the equity from your home as a loan to pay off your credit card debt. This type of loan is secured against your property, which is less risk to the lender and more risk to you (you may lose your home if you do not keep up with repayments). Interest rates are low on the repayments, and the payment terms tend to be long so that you will see much more affordable monthly payments.

However, you can only borrow so much, and you will have to pay upfront fees. If the value of your property decreases, you could also end up owing more than it is worth.

Small Debt Recovery

Debt is a part of everyday life, and it is how we manage this debt that is essential.

For credit card debts, make sure:

  • Always pay your monthly payments on time.
  • Don’t keep taking on multiple credit cards and increasing your debt.
  • Consider all of your options before diving straight in.

If your debt is spiralling out of control and the interest is piling up, you need a plan to manage your finances, and consolidation is an excellent way of saving money if managed correctly.

Ultimately, you need to find a strategy that works for you. Everyone’s situation is different, but the main aim should be to reduce and eliminate your debt. The sooner everything is paid off, the more cash flow and financial stability you have.

For further information and to learn more, speak to a member of our team today on +447860197476.