Paying off credit cards with a loan could be beneficial

June 18, 2011

It has been suggested in a recent report that many people in the UK that have high levels of credit card debt could actually benefit by paying off their high interest credit card debt with a lower interest personal loan. Around one third of people in the UK have admitted that their personal debt levels have increased over the past year and for many of these people the main burden of this debt is high interest credit card debt, which is clocking up huge amounts of interest.

With credit cards charging such high rates of interest, with an average of 18.43 percent despite the rock bottom base rate of just 0.5 percent, many people will be paying these cards off for years if not decades if they are only able to make small repayments towards clearing the balance. Over that period of time they will also pay out a huge amount in interest.

It is suggested that rather than do this, consumers may be better to search out a competitive personal loan and they use it to repay the credit cards. The loan will be taken over a set period of time with a set rate of interest. Consumers can therefore be more structured with their repayments, knowing exactly how much to pay each month, when the loan will be cleared, and how much interest they will pay over the term of the loan.

One official said: “There is no need for consumers to bury their heads in the sand when it comes to their finances and by taking steps to reduce personal debt, many of these problems can be nipped in the bud early on, before they escalate out of control. Trimming down household budgets and ensuring they are paying as little as possible for all their financial products can really help to free up some cash to pay down debt, and should be the first port of call for anyone who is struggling. If you are in the fortunate position where you are able to consolidate your debt, an interest free credit card would always be a good solution. Alternatively, a personal loan could be an option if you want fixed repayments and pay down your debt over a set period of time. For those in more serious trouble, I would advise seeking help from one of the free debt advice charities who can help.”

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Posted by Reno | Filed Under Personal Loans 

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