The information contained within the following news articles have been pre published. The articles were published on the dates indicated and the information contained within these issues include references to taxation, legislation, regulation and other issues or concerns that may no longer apply
Loan or Card your options for paying off debt
If you have debts you want to get cleared, there are pros and cons to using a credit card or personal loan to clear them. Let’s examine the options.
At first glance, it seems like a good idea to use a credit card to amalgamate and pay off your debts, especially with some card companies offering 0% balance transfer for up to 20 months. But take care – you’ll need to calculate how much debt you have and how long it will realistically take you to pay it off, and there’s no guarantee you'll get the credit limit that you need to pay off your existing balances.
However, assuming you can repay the debt within the balance transfer period then this option is likely to work out cheaper than a personal loan. If you find that you are unable to repay within the original term, you can always try to switch to another card with a 0% deal, but this will incur another balance transfer fee which has to be paid every time you switch. So, with the average credit card rate at its highest ever rate of 19.1% you may end up stuck paying much more interest than you expected to. In short, if you don't have the discipline to repay the credit card within the introductory period then a loan is likely to be your best option.
The structured repayment plan offered by a personal loan means you know exactly how much you have to pay each month and when your debt will be repaid. Loans are either secured or unsecured: a secured loan is secured against something of large value, such as your home. This means that if you fail to meet your monthly repayments then the lender could seize your home. Unsecured borrowing is a bigger risk to the lender and therefore will cost you more in interest - these are known as personal loans and are available for a variety of sums over a variety of time periods.
It pays to shop around with personal loans. Don’t just head to your bank - Sainsbury's Finance, Tesco Bank, The Post Office and Marks & Spencer Money offer very competitive deals.
Chartered Financial Planner