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Can I get help with debt?
There are many different reasons you might choose to borrow. It may be a useful way to help you make a big-ticket purchase or spread the cost of an item, for example.
But, like with any borrowing, it’s possible for things to get out of hand. If you fall behind with your repayments or a change in circumstances means your debt starts to become unmanageable, you should look into the options out there to help you.
Debt consolidation loans
If you’ve got a number of outgoings to different lenders – such as personal loans, credit cards, store cards or an overdraft – you might be able to take advantage of a debit consolidation loan.
With this kind of loan, you borrow cash to pay off all your other debts, and then repay the new loan in monthly instalments. This often makes things much easier to manage as you have fewer payments to keep track of. In some cases, the interest rate may be cheaper, but this isn’t always guaranteed.
As you’ll now only be making one monthly repayment with one interest rate, it can be much easier to manage than dealing with several different lenders all with their own interest rates.
However, don’t forget that you still have to make a monthly repayment on your debt consolidation loan. Missing payments or paying late may damage your credit history and make it difficult to borrow in the future. It’s a good idea to set up a Direct Debit or standing order to make your payments automatically each month.
Bear in mind that some lenders may charge you for paying your loan off early.
Money transfer credit cards
Unlike a regular credit card, a money transfer credit card allows you to withdraw cash from the balance into your current account. This means you can use the cash to spend however you like, so it’s suitable for clearing your other debts.
You’ll usually have to pay a one-off fee for this, so first try to work out whether this is a cheaper way to consolidate your debts.
If you have a good credit history, you might be able to find a money transfer card with a 0% period, which means you don’t have to pay any interest on the cash you move over for a certain length of time. By doing this, you could – temporarily – borrow for nothing.
Using this cash to clear your other debts and repaying what you borrow on the money transfer card before the 0% period ends could be a much cheaper way to repay your debt.
But if your credit history is poor, you may not be able to find a credit card with a long 0% interest period. If you don’t think you’ll repay what you borrow before the 0% period ends, this kind of card might not be the best solution for you.
Remember that you must still make at least your minimum repayment every month on this card. Otherwise, your credit history will be damaged and you may lose any interest-free periods.
Balance transfer credit cards
In many ways, a balance transfer credit card is similar to a money transfer card. The main difference here is that you don’t receive any cash, and it’s only suitable for credit card or store card debt.
Rather than moving cash into your current account, you move your credit card balances over to a balance transfer card for a one-off fee. This balance transfer card may have a lower level of interest than your current cards, or it may have a 0% interest period.
Then, you focus on repaying your entire balance in monthly sums you can manage – preferably before the 0% interest period ends.
By doing this, you reduce the number of outgoings you have to one monthly repayment, and you can just focus on paying the balance rather than the interest.
Like with a money transfer, the longest 0% interest periods are almost always reserved for those with the best credit histories. The better your credit history, the longer the 0% interest period usually lasts.
After the 0% or low interest period ends, you may be put on the lender’s standard rate – which is often quite expensive. You should always aim to clear your balance before this date, or it may work out to be more expensive than before.
You must remember to keep on top of your monthly repayments with any credit card, and this is no different. Missing just one payment may mean you lose the 0% interest period and face damage to your credit history.
Sometimes borrowing isn’t the answer
Although these solutions can work if you’ve got a few credit cards or loans that are becoming tough to keep track of, sometimes borrowing more money isn’t the answer.
If you’ve missed payments, you’re falling behind or you don’t think you’ll be able to repay what you’ve borrowed, these solutions won’t be for you.
Instead, you should look for debt help. There are plenty of websites offering debt advice – the Money Advice Service is a good place to start – and there may be professional debt help that could benefit you.
The sooner you tackle the problem and speak to someone, the sooner you’ll be able to get things back on track again.