A new year and a new start, or at least the opportunity to look closely at your finances, and all that dreaded Christmas spending. If you have been purchasing on a credit card, now is the best time to look at all your options, especially an unsecured loan.
Clearly if you’ve used a 0% purchase credit card to buy your goods, then you may have bought yourself some significant breathing space before incurring any interest. But remember, you need to work out the best and most affordable repayment plan that best suits you. If you can clear the balance before the end of the interest free period, then it is wise to do so. However, these repayments will be significantly higher than the minimum repayments required.
If you have more than one credit card that incurs interest, it may be worth consolidating all the debt by using a more affordable unsecured loan, to minimise the debt. Best buy loan deals now mean that you could get unsecured loans from as little as 3%, subject to status. An unsecured loan guarantees that your debt is cleared by the end of the term, so long as you keep up with repayments, and hopefully will stop the temptation to spend on the credit cards!
Rachel Springall, finance expert at moneyfacts.co.uk, notes that are advantages and disadvantages, as with most financial products “with a credit card, borrowers can change their repayments from a fixed payment to the minimum repayment in times of crisis, but with an unsecured loan borrowers must be sure to keep up with the set repayment each month.”
This does mean that “a loan could be perfect for those who can’t resist the enticement of using more of their credit card limit and who need a sensible product to pay back their debt over a fixed term,” says Rachel. Furthermore, with rates coming down across the board over most borrowing limits, now is a good time to act.
|Average Loan APR at £5K||11.7%||7.4%||7.3%||7.2%|
|Average Loan APR at £10K||7.0%||4.6%||4.5%||4.6%|
|Average Loan APR at £20K||8.8%||5.3%||5.1%||5.1%|
What the table also shows is that it may be worth revisiting some older loans that are likely to be on a much higher interest rate. There is quite a difference within the five year period highlighted.
“Before applying for a new loan to transfer debts into, however, customers would need to work out what any early repayment charge may be and see whether they would still be better off switching,” warns Rachel. “It’s also worth keeping in mind that out of all successful applicants, a minimum of 51% are offered the advertised rate.”
Rachel also advises to look further than the high street: “Make sure to shop around, because non-high-street loans are typically cheaper; the lowest rate on the market today on a £5,000 loan over five years comes from Hitachi Personal Finance at 3.4%, while the lowest high street bank loan for new customers is priced higher at 4.5% from Santander.”