If you have balances due on several different loans and credit cards, you may feel like you’re constantly worrying about money. Plus, if you’re splitting your payments 4 or 5 different ways, then it can often feel like you’re not making any progress towards paying off your debt.
However, the good news is that you’re not alone. In fact, according to The Money Charity, people in the UK owed £1,680 billion at the end of January 2020. Plus, it’s relatively easy to consolidate your debt on your own. Here are 5 ways you can do just that.
#1 Take out a loan with a specialist provider
If you’d like to combine and consolidate all of your debt into one loan, then a company that specialises in bad credit and poor credit loans may be able to help you. If you take out a debt consolidation loan with one of these providers, you’ll receive a number of benefits. For example, not only could you make managing your finances simpler, but you could also reduce your monthly payments, lower the overall interest rate you’re paying on your debt, and boost your credit score.
However, before you sign up for a loan, always check the terms and conditions. This is because many loan providers often charge extra fees, which can increase the cost of the loan. You should also make sure your provider is reputable by checking customer reviews. If you read positive ratings like these Everyday Loans reviews, you’ll know that genuine customers benefited from the process. However, if the reviews are negative, you may be better off sourcing an alternate provider.
#2 Ask your bank for a loan
Nobody knows your financial situation better than your bank. After all, they have a written record of every transaction you’ve ever made.
As a result, if you have a manageable level of debt you’d like to consolidate and a good credit score, it’s often worth asking your bank about the possibility of a loan. If you have a current account with a bank, they may even be able to provide you with a personalised loan rate upfront. This way, your loan application may not even need to damage your credit score.
#3 Move balances to a single credit card
If you’re dealing with credit-card debt and you have a card with a large credit limit, then doing a balance transfer will allow you to move all of your balances onto a single credit card.
If you have a low credit limit, this doesn’t necessarily prevent you from doing a balance transfer. You’ll just need to prioritise transferring the balances of your credit cards which have the highest interest rates.
In addition, before you carry out any balance transfer, it’s a good idea to do your sums. Due to the fees and charges that are often involved in doing a balance transfer, it’s possible you may not save any money. In fact, even though transferring all of your credit card debt to one source may be more convenient, it could end up costing you money.
#4 Take out a home equity loan or mortgage refinancing
If you’re a homeowner, you can take out a home equity loan to help you consolidate your debts by using the money you’ve already invested in your home. Or, if you prefer, you could also try mortgage refinancing. This is where you typically increase your mortgage and take all of the extra borrowing in cash.
By raising money in this way, you’ll be able to consolidate your debts or pay off your credit cards. However, you can only take out a loan like this if you own the home you’re living in and you should also be aware that the loan is secured against your home. This means that, if you fail to repay your loan, your home may be repossessed.
#5 Ask about a debt management plan
If none of the above solutions work for you, you can speak to a debt advice organisation about creating a debt management plan. These can be useful if you have non-priority debts like credit or store cards, overdrafts and personal loans. However, you cannot take out a debt management plan if you have priority debts, such as court fines, gas and electricity bills or mortgage debts.
Many fee-paying providers can also help you create a debt management plan. However, before using their services, you must check that they’re registered with the Financial Conduct Authority, as this is a legal requirement.
By consolidating all of your debts, you’ll be able to feel more optimistic about your financial future. Plus, you’ll also be able to take control of your borrowing and put all of your debts into one place. But, if you’re considering any of the 5 options outlined above, you need to carefully read the fine print and really work out whether it’s the best option for you.
Different options will suit different situations and you’ll need to make sure that you’re actually saving money by consolidating your debt. If you’re unsure, speak to your financial adviser before you make your choice.