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Looking to solve your debt problems?

Looking to solve your debt problems?

Category: Debt

Updated: 13/03/2014
First Published: 13/03/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

These days a lot of consumers find themselves struggling with mounting debts, be it from loans, credit cards, overdrafts or – shock horror – payday lenders. The final option should of course be avoided at all costs, but if you're ready to take charge of your debt problems and tackle them responsibly, you need to find the best solution to meet your circumstances.

With that in mind, we've put together a few common scenarios that a lot of consumers could find themselves in, together with ways you can solve those problems and start to become free from debt – for good.

  • I want to consolidate all my debts in one place

If you find that you've got debts spread out all over the place that are adding up and becoming too difficult to manage, the best option could well be to consolidate that debt in one place. A debt consolidation loan could be the ideal solution – just work out the total value of your debts, be they in the form of overdrafts, credit cards or store cards, and then apply for the loan that will cover the lot.

Voila – you've cleared your high-interest debts and can concentrate on clearing this single loan, which will be a lot easier to manage and, ideally, will charge less interest too. As an added bonus you'll have a clear escape route from your debt – you'll be paying set monthly repayments (again adding to the ease of management and making things easier to budget) and will be tied in for a pre-determined amount of time, and at the end of that term you'll be entirely debt-free. Just make sure you don't start using that credit card again…

  • I'm looking for an interest-free credit card to clear my balance

It's all-too easy to see that credit card balance mount up, and then you become stuck in a cycle of ever-increasing interest payments too – which means it becomes even harder to clear it. Well, why not transfer the amount to an interest-free balance transfer credit card instead?

This option could be ideal for those who are actively trying to pay off their card. It can give a much-needed helping hand as, without the extra pressure of interest payments adding to the bill, it could be much easier to clear the debt.

Even better, with the market being full of credit cards offering 0% balance transfer deals for two years or more – currently the top pick comes from Barclaycard, whose Platinum 31 Month Balance Transfer Visa offers 0% interest on transfers for a full 31 months – there's plenty of time to clear the balance.

It could even be a good idea for those with more than one credit card who are looking to consolidate, but the key here is to make sure you're able to pay the balance in full by the time the interest-free period ends, or interest could start adding up again.

  • I need to improve my credit rating – can I still get a credit card?

Theoretically, yes. There are some credit cards that have been specifically designed for those with a poor credit rating to help them build it back up, but bear in mind that because you'll be deemed as higher risk the card will usually come with a much higher interest rate.

Nonetheless, it could be a good solution for those that are starting to take their debt issues seriously and want to turn their situation around, and if you make sure to use it sensibly and repay the balance in full each month you could prove to lenders that you're a responsible borrower and could build your credit rating up in no time.

  • I've only got a small amount of debt. Which card is best?

If you're in the fortunate position of only having a small amount of debt, you've got plenty of different options to choose from. A balance transfer credit card could be ideal if you still want to clear that debt, or if you still use it every now and again it could be worth looking for a card which offers 0% on purchases as well as balance transfers to give you the best of both.

  • I use my credit card responsibly but want to get more from my spending

You might spend on your credit card but are responsible with it and make sure to pay it off, and that means you deserve a bit of a reward. Luckily, if you want to get more from your spending there are plenty of cashback credit cards that can offer that kind of incentive – currently the top pick comes from American Express, which offers 5% cashback for the first three months and 1.25% thereafter. Just spend on your card and get some of the money back – it couldn't be simpler!

Those that offer 0% on purchases could be a possibility as well, although if you pay your balance off in full each month you won't accumulate any interest anyway. It's all about weighing up whether you'll be benefitting more from cashback or reduced interest payments, but there's bound to be a solution that meets your circumstances.

So, if you're struggling with mounting debts or simply want to manage your credit more effectively, you don't need to stay in the current cycle. Consider the alternatives and see if you can tackle your debt problems with the solution that works for you.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.