Credit or debit cards are a valuable way for making purchases without the hassle of carrying around cash, which has been revolutionised over the past several years by the invention of contactless payments. Nowadays, we can use the contactless feature on our cards to pay upwards of £100 per transaction, which has led to some concerns about fraudulent activity and personal indebtedness.
Several behavioural experts have voiced concerns over the growing amount that the public can spend via contactless payments since it could encourage reckless spending and lead to high levels of credit card debt. Before you know it, your wallet is full of various credit or debit cards, all with varying balances, which you’re running out of time to consolidate.
Paying off your debts may be intimidating, but it is achievable. Many options are available to individuals looking to consolidate their credit or debit card debts, some of which we outline in this article to provide individuals in a bad financial situation with a timeline and a plan to get out of debt.
Take Out A Loan
Taking out a loan may seem counterproductive when you’re trying to consolidate your credit or debit card debts, but it is a prevalent option for those who want to get out of debt quickly. Debt consolidation loans work on the basis that you borrow enough to pay off your outstanding obligations, so you’re left with one loan to manage instead of several.
For instance, suppose that you had four credit cards with balances of £1,000, you could approach your local bank or a broker to take out a personal loan, payday loan or similar for £4,000. In this instance, you are left with four credit cards paid off and one loan of £4,000, which you know the interest rate, when the payments will be taken, and a timeline until you are debt-free.
For more insight, approach brokers such as PayDay UK for more information about their Pay Day Loans and the different options available to you for consolidating your credit or debit card debt. Contact one of their team today to discover more about their services and how they could help you or follow their blog for related topics.
Consider A Debt Management Plan
Another attractive option for individuals looking to consolidate their credit or debit is a debt management plan. It is not a loan, but a program offered by non-profit credit counselling agencies. When you decide to take out a debt management plan, your chosen credit agency will contact each creditor to inform them that the program is being actioned.
While they do this, they may see if they can obtain commissions from the creditors, such as lower interest rates or lower monthly payments. From there, your costs will go to your chosen counselling agency automatically, which they will then use to pay your outstanding debts. Usually, this option is not the quickest as it can take as long as 3-5 years depending on what is owed, but it will help eliminate all outstanding debts.
Look At Home Equity Loans
Providing that you’re a homeowner, you could consider looking at a home equity loan, also known as a second mortgage, which allows you to borrow money against the equity held within your property. These loans are secured by your property and are mainly used to help finance significant investments such as property remodelling projects, purchasing a vehicle or secondary education fees.
The amount you’ll receive is determined by the value of your property and is repaid in monthly instalments, which, much like other forms of loans, gives you a timeline or plan as to when you can expect to be out of debt.
The only major downside to taking out a home equity loan is that it’s not a suitable consolidation option for those looking to get out of debt quickly, as it can take between 5-30 years to repay fully. To determine how much equity is in your home and how much of a loan you’re likely to get, use online calculators to determine the amount you could receive.
Use A Balance Transfer Card
Another option for consolidating credit or debit card debt is using a balance transfer card. However, this option is generally only available to those with an excellent credit score. Balance transfer cards are usually offered by banks or companies which enable you to transfer the existing balance on a credit or debit card to another with 0% interest.
Usually, this interest rate expires after 12-18 months, and then the rate on the card increases substantially, and worst-case scenario, you could end up with late payment or transfer fees. So, ensure that you can consolidate all your debts within the first 12-18 months; otherwise, you could end up paying more than you anticipated.
Borrow From Friends or Family
Providing that you don’t have too many debts, you could always consider asking friends or family members for a helping hand with consolidating your debts. Generally, borrowing from family and friends is much safer and cheaper than alternate methods and more flexible repayment.
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