Personal Finance : Top tricks to pay off debt for good in two thousand sixteen

Almost nine in ten people start the year with credit card debts that average £2,400, according to Uswitch.com.
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Furthermore, two-thirds of Britons are concerned about their level of debts, found the comparison site.

The good news for borrowers is interest rates are to stay low well into 2016 – so now’s the time to prioritise paying off borrowing before it could get more expensive.

First, put together a realistic budget, working out the amount you owe and how much you can spare each month to pay off debts until they are cleared.

Citizens Advice has a budget tool and more information about how to prioritise debts.

If you’re feeling seriously overwhelmed by your debts you can also speak to someone for free from Citizens Advice or the National Debtline.

Unless you are in arrears or behind on repayments, look to pay off your most costly debts first – the one with the highest interest rate.

But if you can bring down the cost of your debt, it means that you can pay it off even quicker – here’s how.

0 per cent balance transfer credit cards

Balance transfer credit cards allow you to move debt and not pay any interest for a set period of time – so you can save money and clear debt faster.

As long as you maintain minimum repayments, you can pay off more money one month than another depending on your financial commitments.

At the moment, both Virgin and Barclaycard offer balance transfers cards that charge no interest for 32 months.

However, these cards typically come with transfer fees that are charged as a percentages of debt moved and added to the debt – on the 32 month cards Barclaycard charges 1.15 per cent and 1.19 per cent.

You can get lower fees in exchange for shorter interest free periods. For example, the Post Office balance transfer card has a fee of 0.33 per cent and charges no interest for 26 months.

The best deal depends on how long you need to pay off debts.

Just remember to keep a strict schedule with repayments.  The provider is hoping you will still have debts when the interest-free period ends, which means you have to pay to move debt again (incurring another fee) or your balance is subjected to the card’s standard charges.

The best offers are only available to people who have an excellent credit rating – Moneysupermarket allows you to check you chance of approval without damaging your score.
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Alternatively, look at cards that are designed for people with lower credit scores.
Loans

Taking out a loan allows you to consolidate your debts, and gives you a set repayment schedule for paying back money.

This could be a good option if you have debts on a few different credit cards or are tired of moving debt between different cards without ever clearing it.

You can also be more flexible with the cash, and use it to pay off credit cards, overdrafts, more expensive loans or any other debts you may have.

At the moment, rates on loans between £7,500 and £15,000 are particularly competitive.

M&S Bank offers loans at this level at a rate of 3.5 percent or Cahoot has deals at 3.6 per cent.

Bear in mind that most loan providers charge a penalty fee if you want to repay your loan early.

0 per cent money transfer cards

Some cards allow you to take the credit as an interest-free cash payment – paid for by a percentage fee.

You then have a set period of time to pay off the debt without interest, which should mean you should clear it faster.

These cards can be useful for paying off an overdraft, a loan or other more expensive debts.

But the fees are more expensive than balance transfer cards.

The Virgin Money money transfer card gives you 36 months interest-free and charges a 2.39 per cent fee on the sum moved.

Alternatively, the MBNA Platinum credit card (available through Moneysupermarket only) gives you 36 months interest-free on a fee of 2.99 per cent.

Nicolas Frankcom, money expert at USwitch.com, said: “At this time of the year, money worries are weighing heavily on a lot of people’s minds. Overspending during the festive period will leave many with a financial hangover, but they cannot afford to stick their head in the sand.

“By taking a quick look at their finances, consumers could save a considerable amount of money – and start taking steps to get back into the black.

“Balance transfer cards with an interest-free period could be a lifeline for those needing some breathing space from debt.

“Those looking to transfer should do their research to find the right card by looking carefully at any transfer fees, not just the length of the 0 per cent offer.

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“If you can’t see a way out of your current level of debt there is help out there. Contact StepChange Debt Charity or the Money Advice Service for free and impartial advice to get your debt under control.”

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