Help! My credit card bills are out of control
Sep 13, 2006
Barely able to meet the minimum monthly repayments on your credit cards? Using your card to buy your weekly supermarket shop? You could be in danger of your credit card debt spiralling out of control.
Many of us have trouble balancing our income with our expenditure and credit cards are the most common method for fuelling the 'buy now, pay later" culture but, whilst we all know that we will have to repay for our indulgences later, there is no guarantee that we will always have the income levels to sustain that and therein lies the problem as, most of the time, what started off as an affordable monthly repayment at the beginning can quickly spiral into an insurmountable debt.
Credit cards have become a way of life for almost everybody. They are a popular way of borrowing money because you can repay it in smaller amounts over a longer period of time. They can also be the most precarious method for borrowing, however, as the level of borrowing and repayment amounts can fluctuate dramatically each month, making it more difficult to manage our finances.
They also represent one of the least efficient ways of borrowing money. There are so many credit cards on the market, all competing in a highly competitive arena. To maximise their profits, they rely heavily on the media and advertising to seduce us into tempting offers of 0% interest for a pre-determined period. They are also quick and easy to apply for. Sounds good on paper…? The trouble is that once the interest-free period is over, many consumers do not pay off their full balance each month and as they spend more on their cards, accruing interest and only make the minimum payment each month; so the problems begin.
Unemployment or an accident or illness for example, can strike anyone at any time, no matter how immune we think we are. We start using our credit card more and more until we reach the spending limit, then, what do we do? Simple…we start using a new credit card and the spiral into even greater debt continues. With that, comes more interest we have to pay back each month to simply service the debts until, eventually, we realise that we are barely able to afford the minimum payments.
Warning signs
If you are only making the minimum payment every month and find that you sometimes use your credit card to buy your weekly grocery shopping or to meet your household utilities bills, then it is time to consider alternative ways to reduce your credit card debt before it gets out of control. This is especially the case if you have more than one credit card.
Consolidating your debts into one monthly affordable sum
Debt consolidation is a strategy that is sometimes used by consumers to better manage their debt problems. Rather than paying off several separate bills each month, a consumer consolidates their debts with just one financial institution that will arrange one lower monthly repayment over an extended period of time.
With a fixed rate loan, instead of paying off the minimum amount on each of your debts (which, on credit cards, generally achieves little more than simply paying off the interest accrued each month), along with the variance between the different APRs on each of your cards, you will be able to start paying off the actual debt in one consolidated payment at (usually) a lower level of APR and over a longer term.
Depending on your credit rating, if you have never previously experienced financial difficulties and if you are able to pay off the loan and accrue no further debt, this will be seen as a positive credit rating.
However, any prospective lender will look at how much debt you have outstanding and your credit risk. If you have a previous history of bad credit or large debts, a lender may only consider offering a secured loan, reducing the lender's risk. Whilst the interest on this type of loan is even lower, you need to be very sure that you will be able to cope with the loan repayment, especially in the case of a secured loan, as your house could be at risk if you default on the repayments.
Once you have found the solution to your own individual circumstances, the first 'golden rule' is to cut up your credit cards. Too many people have opted to consolidate their debts only to end up even deeper in the mire by running up their credit card expenditure again, having used the loan to get out of the problem in the first place. Thereby, they not only find themselves deep in credit card debt again, they have the additional burden of having to repay the loan also.
The key questions to ask when considering a debt consolidation loan are:
- What will be the overall cost of the consolidation loan and how does this compare with the overall costs of the debts that are to be consolidated ?
- What will be the length of the loan, both in months and years ?
- What is the cost of each monthly repayment, both with and without payment protection insurance ?
- Will the loan be secured against my property ?
However, managed sensibly and with all the facts to hand, a debt consolidation loan can often be the ideal solution to managing your debts more easily and at a lower cost over the long term and often alleviates the stress caused by multiple debts.
With Secured Loan UK .com, no matter whether you're Status or Non Status, being a Homeowner means we can get you a competitive rate that matches your credit history.
All you have to do is complete our Secured Loan Application Form and let us give you a FREE and NO obligation quote.
