Detoxing your finances
UK households have been on a “borrowing binge” in recent years, triggered in part by low interest rates and stagnant wages. TUC figures show that the average UK households unsecured debt is now £13,000; this includes personal loans, credit cards, store cards, over drafts, etc.
While borrowing can be a useful way of funding large, irregular or unexpected purchases, it’s not difficult to find yourself in a position where too much of your family income is taken up repaying a variety of individual debts – resulting in a stressful juggling act each month!
Credit Card debt is often highlighted as a particular problem. This is because of the typically “high” rates charged and the ability to make a relatively small “minimum” payment if the month to month budget is tight. Although this frees up monthly income, in the long run it can keep you in debt for a long time and cost you a lot of money in interest.
For example, making only the minimum payment each month on a typical credit card debt that started at £3000 at an annual rate of 17.9%, it would take you over 27 years to clear the balance at a cost of almost £4300 (that’s just the interest).
This highlights that while maintaining minimum payments will keep creditors happy and your credit score in good health, it’s not the smartest way to tackle the situation.
Debt consolidation can achieve a number of objectives, including helping to make your repayments more manageable by replacing multiple repayments with just one, reducing your monthly repayments to free up household income and reducing the overall cost of your debt by moving to better rates of interest. We’ve put together a short animation that clearly defines what debt consolidation is and highlights the benefits it can deliver; you can watch this here.
For homeowners, debt consolidation can be achieved with a second mortgage. We’ve helped many clients to achieve each of the above objectives in this way. Find out if we can help you by calling our team of experts on 0345 450 4678.