Juggling several credit card and loan repayments can be a pain – especially if your repayments are all due on different dates.
Add to this the fact you may be paying a different interest rate on each one, and you can see how easy it is to lose track.
The thing is, if you do start to muddle up your repayments and miss one as a result, the consequences can be serious.
For one, your lender could charge you a penalty for the missed payment, giving you even more to pay. And for another, missing or even just being late with your repayments will leave a negative mark on your credit score. This will make it harder to borrow in the future.
So what are my options?
Debt consolidation lets you swap multiple repayments for just one – which, we’re sure you’ll agree, is a lot easier to keep track of. You’d also be replacing several interest rates and repayment dates with one.
Let’s look at your options:
Balance transfer card – Transfer the outstanding balances on your current credit and store cards on to this new card and make a single monthly payment to clear it. Some of these cards come with a 0% introductory offer, which means you’ll pay no interest if you clear the balance within the set time.
Money transfer card – Like a balance transfer card, but you transfer money into your current account and use this to clear your other debt balances. This gives you the option of paying off your overdraft and any personal loans as well as your store and credit cards.
Debt consolidation loan (personal) – Take out a loan to pay off your other outstanding debts and you’ll swap several repayments for one. The interest may also be less, although you may pay more overall as you’ll be making repayments for longer.
Debt consolidation loan (secured) – Like the option above, except the loan is secured to your home. This gives you the option of borrowing more and paying it back over a longer time, but if you start missing your payments your home will be at risk, and again, you may pay more overall as you'll be making repayments for longer.
Which should I choose?
The option you choose will ultimately come down to a number of things, including:
- How much your current debts come to
- Your credit history
- What deals are available
There are some things they all have in common, though. For example, if you stop making your repayments, your credit history will be negatively affected.
It’s also important to remember that debt consolidation doesn’t mean you’re debt-free – it just simplifies your outgoings. If you clear the balance on your credit card and then build up a new debt on it, you’ll have to manage this repayment as well as the repayments towards your consolidated debts.
Disclaimer: All information and links are correct at the time of publishing.