Get out of debt

Covered in this guide...

Get relief from your personal debt by transferring your credit cards balances to a zero-interest balance transfer card, once you've got that under control you can apply for a debt consolidation loan.

What is a balance transfer credit card?

A balance transfer is when you transfer your existing credit card debt from the bank where it’s held, to a different bank which offers a zero percent per annum interest rate specifically for balance transfers. Big banks are fiercely competitive, and this is one way they can attract new customers.

The zero percent balance transfer offer will give you a chance to repay your credit card debt while saving on interest costs during the promotional period, which is likely to be a period of six, 12 or 18 months. Be aware, however, that if you can’t pay off the entirety of your debt before the promotional period ends, you will then be moved to a standard interest rate for the remaining balance.

How do I apply for a balance transfer?

Generally, you would need to request a balance transfer at the time you apply for a new credit card, in order to take advantage of any promotional offers such as the zero percent interest rate. Most banks will have a question on the application form asking if you would like to transfer your existing debt to the new account. The application form will ask for details of your existing credit card debt, including your existing credit card’s bank and account number and the amount you are applying to transfer. Once your application is accepted, the new provider will automatically transfer your debt to the newly opened account. You may need to activate your new card first, which the new provider will assist with.

View our balance transfer cards here.

How does a consolidation loan work?

Debt consolidation is when you take out a new loan to pay off all your debts in one all-encompassing loan. The idea is to provide a way to reduce your interest rates and fees, by having all your loans at the same interest rate. This can give you a better chance of getting yourself out of debt than having multiple loans with different interest rates. Consolidating your debt can also streamline your debt, as you’ll only have one loan repayment to keep track of instead of multiple. Although a debt consolidation loan can offer reduced interest rates and fees, you still need to keep in mind there might be other expenses such as refinancing costs or early-payout fees which the providers of your existing loans may charge.

By combining several different high-interest loans into one lower-interest loan, you can make debt more manageable. A single payment can be a lot easier to manage than multiple ones, as well as saving a lot of money by paying less interest. With debt consolidation, it’s important to be aware there’s a chance that repaying a new loan over a longer period could cost more in interest overall. Aim to keep paying it off as fast as possible to avoid accumulating new debt along the way.

View our debt consolidation loans here.

What debt can I consolidate?

  • Personal Loans

    Vehicle, study or other personal loans are a common type of debt which people choose to consolidate. You might be wanting to take out a debt consolidation loan to combine several separate personal loans or a personal loan and another type of loan.

  • Credit/Store/Charge Cards

    Such as the Farmers card, etc can easily and rapidly increase if you take your eye off the ball, just as with credit cards. This is another type of debt which people often decide to consolidate.

  • Other Credit Accounts

    Which might be eligible for consolidation, depending on the provider and the loan, might extend to utility debts such as phone, internet, electricity or subscriptions. Not all credit providers will allow you to consolidate these types of debts. However, it’s worth looking around to see which credit providers do allow it when considering your options for consolidation..

Summary

  • Be realistic with what you can afford to pay each week, understanding this is the first step to good financial management and an improved credit rating

  • If your credit card(s) debt has got away on you, moving the debt to a new card with a balance transfer savings offer is a great way to save money on your payments.

  • If you have multiple loans or debts of varying rates and fees, combining into a consolidation loan will help you manage by simplying into one regular payment and will hopefully decrease the total amount you have to pay.