If you have multiple debts on different credit cards, it may be worth consolidating them into one large loan. This means that instead of having various outgoings to different lenders which are hard to keep on top of, you’ll end up with a single monthly payment. You might find that this is an easier and more cost-effective way of paying off your debts, helping you to better manage your finances.
There are a few different consolidation options, so make sure you figure out the one that best suits your situation. Here, we’ll give you some top tips to help you effectively and efficiently consolidate your credit card debts.
Research the best rates
If you’re consolidating debts from multiple credit cards to a single credit card, it’s really important to do your research. Scour the market for the best balance transfer credit cards with low-interest rates. There’s no point consolidating your debts into a loan that is going to cost you more in interest long term.
For example, if you are currently paying an average interest rate of 20% across your multiple debts, it would be pointless consolidating them into a new credit card with 22% interest, as it will end up costing you more.
There are certain balance transfer cards that offer 0% interest for a fixed term. This is a great option if you want the opportunity to pay off your debt without incurring any additional charges. However, it’s important to check the length of the interest-free period before you commit, which takes us onto our next point.
Check the length of the deal
Many lenders offer 0% interest deals to entice customers. However, it’s important to note that many of these interest-free periods are not unlimited and are only valid for a fixed term, such as six months. Once this period ends, you will start to be charged the representative APR, which could lead to a massive spike in your payments. This is when these types of cards can get expensive. So, it’s important to be realistic and pick a card that will allow you to clear your entire debt before the 0% interest period ends. If you’re not sure where to start, have a look at a credit card comparison site. You can check out the various offers on the market and compare the lengths of the interest-free terms. Some are as little as six months, and some as long as 28 months, so choose the one that’s right for you!
Don’t Forget the Balance Transfer Fee
Sometimes, when you consolidate your existing debts to a balance transfer card, the lender will charge you a fixed fee. Most of the time, this is a percentage of the balance you are moving over. For example, if you are transferring £2,000 in total to your new card, and the fee was 4%, you would be charged £80. This may not seem a huge cost, but the higher your debts, the higher your fee will be. Factor this cost in when you are researching the best deals, so you don’t have to face fees that you can’t realistically pay for.
Why not look into consolidating your credit card debt today? It may offer you a much more cost-effective way to manage your finances.