Did you know that more than 61 million credit cards have already been issued in the UK?
While credit cards are relatively easy and affordable, they might turn out to be a costly affair if not utilised wisely. For example, if you take into account credit card debt per household, it’s approximately £2,133.
This is because most people consider credit cards “free money.” In fact, various studies confirm that it’s easy and convenient to spend money with a credit card when using credit cards. This is why the rate of credit card indebtedness is increasing.
That’s how the concept of debt consolidation came to the forefront. It rolls down multiple debts (usually that are high-interest) into a single payment. It’s an ideal way to lower down your interest and reorganise your debt to pay it faster.
But how to do it? Let’s find out!
How to Consolidate Debt?
Technically, there are two ways to consolidate your debt. But both of them will turn your debt payments into a monthly bill.
- You can opt for a balance transfer credit card to transfer all your debts into this card and pay the balance at a lower interest rate and without any interest charges during the introductory period. So, you can easily consolidate credit card debt into a card that lowers your interest rate, making it easier for you to pay your debt.
- You can go for a debt consolidation loan and use that money to pay off your debt initially and then pay the amount back in instalments over a period of time. You can only qualify for this if you have a bad or fair credit rating. But that’s not always the case.
The final choice depends on your circumstances and personal preference.
Now that you are aware of the ways of consolidating your debt, the next probably question is:
When Should You Opt For it?
You should opt for this loan under the following circumstances.
- Your debt, excluding mortgage, does not increase 40% of the gross income.
- Your credit card must be good enough if you wish to qualify for a 0% credit card or low-interest debt consolidation.
- You must have a regular source of income.
- You should have a plan ready to never get into any debt again.
Points to Remember:
If you have decided on debt consolidation, this is what you must do next.
- Always look for the best deals instead of shopping from the first website you visit.
- Get advice on money spending to prevent yourself into debt again.
- Always compare the annual percentage rate before looking for loans again.
- Spend wisely using a credit card.
To Sum it Up
If you have got debt, not one but multiple, and you are struggling to keep up with the repayments, you have a chance to merge all your debts to lower your monthly payments.
However, you must find a secured loan provider to avoid getting into the debt cycle again. That way, you can move on living your life comfortably without worrying about debts any more.