7th January 2016
Many people will enter the New Year with the burden of debt from the Christmas period. Almost 90% of people are said to have an average £2,400 of credit card debt with two thirds of Brits saying they are concerned about their personal debt levels.
With interest rates set to stay low at least for the start of the year, this is the best time to pay off those unwanted debts before rates begin to rise, increasing the cost of borrowing.
The main tip is to be realistic- rather than setting just long term goals, look at how much you can afford to put aside for repayments each month and how long it would take to pay off your debts using this.
There are various resources to help you with budgeting such as mobile apps or Citizens Advice. If you do feel the situation has become too much to handle then we urge you to contact Citizens Advice or companies such as National Debtline for help and advice.
There are some other tips that can help you to clear your debt so keep the different options in mind.
Cards that allow you to do a balance transfer allow you to move your debt interest-free for the initial period so you pay less in interest and can therefore pay off more of your debt. Although they offer an interest-free period, be aware that many do charge a transfer fee when moving your debt, the rate varies between providers. You can offset these fees by taking a shorter interest-free period depending on your situation and how quickly you can pay off your total debt.
You could consolidate your different debts by taking out one lump sum loan which would allow you to set a stricter repayment schedule and avoid juggling different debts all at once. Say for example, you have numerous credit cards and are continually moving money between them without really paying off the credit- this could be a good option for you. This would also allow you to pay off your more expensive debts and focus on one loan, preferably at a lower rate. Keep in mind that many providers have a penalty for early repayment so plan carefully how much you would need and for how long.
There are also some cards which give you credit in the form of interest-free cash. In exchange you pay a set percentage fee but they give you the chance to clear your debts faster as you are not paying off interest on the card. These cards are a more expensive solution compared to balance transfer cards so be sure to look at the numerous providers and see what option is best for you.
It may be something you take for granted with so much information at your fingertips but know your own finances is the best advice out there. It is easy to lose track of spending and debt so stay on top of it by knowing who you owe, how much you owe and what you need to do each month to get on the path to being debt free!