In recent years credit cards have been a popular form of credit for many people. However, they have also played a pivotal role in debt escalation in the UK.
Relatively easy to obtain, credit cards provide instant access to extra cash, not to mention the temptation to spend beyond our means.
The important thing to remember about credit cards is that they are a short term lending solution, making them ideal for emergency situations – not everyday spending.
If you do make a substantial purchase, the best thing to do is to repay that debt as soon as you can – this could mean increasing your current repayment rate in the short term to avoid the credit card company making money from purchases through interest and charges.
How to clear credit card debt
You could try transferring you balance to a card with 0% APR or very low interest rates to repay your debts. Switching to a card like this means you’ll be repaying the debts you have accumulated – not the interest rates that are being applied. You have to be very careful to control spending habits if you do this and avoid adding additional purchases and increasing your debts.
If your credit rating has been affected and you are having difficulty getting another card to transfer your balance to and are struggling to meet repayments, you could clear credit card debt with a Debt Management Plan.
A Debt Management Plan will enable you to consolidate your debts into one manageable monthly payment – helping to ease the stress of dealing with multiple debt repayments.
At Baines & Ernst, we will contact your credit card company and negotiate a lower repayment rate on your behalf and distribute payment to them every month. We’ll even handle all credit card company calls and letters so you don’t have to.
For more details on how we could help you clear your credit card debts, speak to a friendly member of our team today.
What is a consolidation loan?
A consolidation loan is another way to pay off multiple debts so that you are left with just one debt to repay. One of the advantages of combining small debts into one larger loan is that it typically means a lower interest rate overall.
As with credit card debt consolidation, you need a good enough credit rating to qualify for the consolidation loan. Personal loans also have fixed repayment rates, so you must be able to fit the repayments into your budget.
A consolidation loan may not be a practical solution if your debts are quite large. Therefore you should explore alternatives to clearing debts such as clearing debts through a Debt Management Plan.
A Debt Management Plan enables you to repay debts at a rate you can afford and could stop you from getting deeper into debt. It also offers more flexibility than a loan because you can increase repayments as your circumstances change – helping you to repay and clear debts in a shorter amount of time.
What’s more, of 84% of debts we manage, we freeze interest and charges, whereas you will have to pay interest and APR rates on a loan – so you’ll pay back more than you borrow*.
A Debt Management Plan isn’t a loan; this means that you don’t have to complete a credit check to qualify. We will also reduce the stress of dealing with demanding creditors as we will handle all communication and distribute payments to them every month.
How to clear a Payday loan
If you get a payday loan, it is essential to repay it as soon as possible so that you can avoid large interest rates. Some companies have been known to charge as 4,000% APR so make sure you understand the repayment structure before taking a loan out.
It can be all too easy to fall into a cycle of debt with a payday loan, as you may have to take out another loan because you are unable to afford repayments as well as general living costs.
If you’re struggling to repay a payday loan, you could consolidate your debts into a Debt Management Plan. This means you will pay an affordable repayment amount every month so that you can afford all your other priority bills like rent, food and utilities.
For a no-obligation financial review, contact our friendly experts today.
* By choosing to repay your debts at a reduced rate, you could increase the amount owed and the period in which you repay your debts.
Baines and Ernst Ltd