If you find you are being charged high rates of interest on loans, credit cards or bank overdraft then a debt consolidation loan may be for you. However this only makes good financial sense if your debt consolidation loan is a lower interest rate and will cost less in the long run. A cheaper loan should also leave you with more spare cash to reduce your debt even faster.
Here are a few other things to consider:
- Other lenders’ fees. Some lenders charge an ‘exit fee’ if you end a loan early, ask them about any fees or charges before transferring the debt away from a lender or to another lender. AdvanceCU does not charge admin fees and exit fees on our loans (except for an optional £1 Express Payment fee).
- Cut your spending. See our Household Expenses article for ways to live for less. This should give more spare cash to help clear your debts.
- Anything in your future? Is there some change to your life soon that could affect your income, expenditure and your ability to repay a loan?
- Payday lenders are a warning sign. If you find you regularly resort to high interest short-term lending this could indicate that your finances are running out of control. You may need some free debt advice.
- Overdraft should be for emergency use only. Overdraft charges of £1 per day at Santander, Halifax and other banks don’t sound expensive, but that is £365 per year and the debt isn’t paid off! Unauthorised overdrafts can be £6 per day or more. Find out more at Money Advice Service.
- Beware minimum payments. It can take a very long time to clear a credit card if you only ever make the minimum payment. Check out www.cardcosts.org.uk to see how long it could take to clear a credit card by just paying the minimum payment.
- Credit History will be affected if you miss a payment or have an arrangement to pay a debt.
- 0% credit cards. Some credit cards permit you to transfer debts to a balance transfer credit card at either 0% or a low interest for a fixed period, subject to credit check. These can be a great option to help clear credit card balances at low cost.
How Advance Credit Union can help
A loan from AdvanceCU could help spread the cost of repaying your debts. We can pay your creditors directly so you know they are paid off. We may require you to then cancel credit cards or reduce your agreed overdraft to help keep your finances under control. You can borrow up to £8,000 from 12 months up to 36 months, subject to affordability and credit check.
Regular Savings. Independent research has shown that saving just a small amount regularly while repaying debts is a great way to build a reserve should an unexpected expense crop up, plus the sense of achievement of building up a nest egg. Savings with credit union will soon grow into a tidy sum!
Engage Account is our Visa Debit card account, great if you don’t want to increase your credit card debt. Plus it offers great cashback rewards and discounts at Asda, Argos, M&S, Debenhams and many more. Engage Visa card is accepted wherever you see the Visa logo (see terms and conditions)