If you ever see a loan advertised as interest free, it is understandable that you would find such deals attractive. While these loans might seem attractive at face value, and generate a lot of interest and enquirers from customers, is there really such a thing as an interest free loan?
While an interest free loan might well be interest free in terms of interest applied to the overall loan balance, you’re going to pay for the loan somehow. Loans that are advertised as ‘interest free’ will usually have a ‘merchant fee’ applied, which you repay along with your loan balance each month. In such cases, the interest rate equivalent will have been built into the so-called merchant fee, meaning the finance element itself is not actually free.
In comparison, loans that aren’t ‘interest free’ may still have different fees and charges that are applied, however these will be built into the actual comparison rate you are given when you apply for and accept the loan.
Another potential problem with ‘interest free’ loans is that they can be inflexible regarding making additional payments or repaying the loan off in full earlier than the loan schedule. This is a common source of additional fees with such loans, and can quickly mean you would have been better off accepting a regular loan, even if the interest rate seemed unattractive at first.
Let’s now take a loan advertised as interest free and a loan advertised with an interest rate and show you how to compare the two as you try to make a decision.
Some loan providers might provide a lower merchant fee upfront but then lock you into additional charges throughout the loan term, thus increasing their earnings from your account.
The main thing to remember with this example is that, in most cases, loans such as that shown in loan A will include all administration fees and charges within the actual comparison rate. The only additional charges you are likely to incur with such loans is if you have to pay an extra fee should you want to make an extra payment or repay the loan in full. However, those charges will still apply in the example of loan B.
To get a further idea of how companies offering loans such as B above are charging you, speak with lenders you are considering applying for a loan with and asking about their fees and charges schedule. They will then explain how these are absorbed into the actual comparison rate but also provide a specific breakdown of what you’re paying for.
As well as loans, credit cards, store purchases, and other types of credit are often advertised and packaged as being interest free.
In these cases, interest free usually only applies for a specific promotional period. After the promotional period has ended, interest will be applied, and the rate will often be much higher to compensate for the 0% rate earlier. Some credit cards and store cards even offer deals where you don’t have to pay anything for a specific period of time, alongside a 0% interest deal. For example, you could open a new credit card that is advertised as 0% interest for six months, as well as pay nothing for six months. If you aren’t switched on when it comes to managing your finances, you might look at this and think you can save a fortune by not repaying anything over six months. However, after six months the high interest rate is suddenly going to kick in, and you’ll have missed the opportunity to clear your balance before this happens.
As with personal loans that are ‘interest free,’ such products will usually also have an additional schedule of high charges and fees, and be very inflexible, as a counterbalance for no interest being applied.
Ensure You Aren’t Caught Out
We understand how easy it is to be taken in by attractive looking offers such as ‘interest free,’ be it on a loan, a credit card, or any other type of finance or credit product. However, by looking closer at what is being offered, you will usually identify that the ‘interest free’ deal could end up costing you a lot more than if you just chose a product that applies a regular interest rate. The only exception would be if you use a 0% credit card and ensure the balance is cleared before the end of the promotional period, however you would need to make sure you are set up to manage your finances well to ensure you don’t get caught out with these.
If you are considering a MacCredit personal medical loan and want to know how much of your interest rate is made up of administrative fees and charges, call us now on 1300 884 355.
Disclaimer: This article contains general comments and recommendations only. This article has been prepared without taking account of your objectives, financial situation or needs. Before taking any action you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs. If this article relates to the acquisition, or possible acquisition, of a particular credit product you should obtain and consider the relevant disclosure documents before applying for the product.
Credit Reports, Payment Options
Bariatric surgery is widely considered to be the most effective intervention to deal with morbid obesity, while a 2015 publication looking at the correlation between bariatric surgery and long-term survival rates demonstrated it reduced mortality in comparison to non-surgical intervention, including dieting and exercise.
While gastric band and lap band surgery has been widely available for a number of years, vagal blocking nerve therapy systems are a relatively new treatment method, which has also been shown to be effective.
Vagal blocking involves the implanting of a rechargeable neuroregulator into the lateral chest wall. Flexible leads from this device are then placed around the vagus nerve laparoscopically. The vagus nerve is the main nerve between the brain stem and the abdomen, and controls how your body tells your brain you are hungry.
Once the device has been implanted, it intermittently blocks signals sent along the nerve to reduce feelings of hunger and increase feelings of satiety. The blocking of nerve signals is done via a charge, and the neuroregulator is programmed to control the strength and frequency of these.
The operation to implant the neuroregulator device usually takes between 60 – 90 minutes. While it is conducted under general anesthetic, it is usually conducted as an outpatient procedure, meaning you will be in and out of the clinic or hospital on the same day.
Choosing to undergo vagal blocking therapy as your weight loss solution has a number of advantages, both from the perspective of the surgery itself as well as for your long term weight loss.
In addition to these primary benefits, you will enjoy a range of advantages linked to losing weight, including improved self-confidence, feeling more energetic, and potentially influencing the affect linked conditions, such as diabetes, has on your life.
The cost of vagal blocking therapy will depend on the availability of the treatment in your region, on the clinics that provide it, and whether you have private medical insurance or not. Most clinics keep the cost guarded until you contact them, however most studies into this treatment describe the typical cost as being between that of gastric band and gastric bypass surgeries, though others have cited costs in excess of $20,000.
If you are looking to change your life by undergoing vagal blocking therapy, but are worried about covering the cost, MacCredit can help, with a tailored payment plan to suit your circumstances. We can also put you in touch with some of the leading clinics in Australia that are offering this procedure, and put you on the road to sustained weight loss and all the associated benefits today.
Call us today on 1300 884 355 to learn more.
Having a good credit rating and a strong credit history is considered to be an important element of life. A good credit rating and a credit history that paints you as a trustworthy and reliable borrower can help you access credit whenever you need it, whether you are looking to take out a new mobile phone contract or be accepted for a mortgage.
Given the importance of a good credit rating and the flexibility and choices having one can bring to your life, what are the best ways to maintain and increase your credit rating?
As alluded to above, your credit rating will be checked whenever you want to open a new account or take out a finance product. This includes what are known as “non-finance” products such as mobile phone contracts and utility bill accounts.
Your credit rating not only decides whether you will be accepted or not, but also goes some way to dictating the terms of your credit agreement. For example, let’s look at a scenario if two people were to apply for a personal medical loan from MacCredit:
Once all circumstances have been considered, it is possible that both person A and B could be accepted for a loan. Yet, due to person A clearly appearing to be a lower credit risk, it is likely that they will be able to:
These benefits mean that, depending on their reason for needing a loan from MacCredit in the first place, they have far more flexibility when deciding how to proceed.
There is no one way nor is there a certain formula that will ensure you always maintain a high credit rating or improve a low one. There are, however, a number of factors that are widely known to be considered by credit referencing bureaus. This means that here at MacCredit we are able to provide you with some practical ideas, some of which could become valuable financial habits, to improve your credit rating now, and maintain it into the future.
Here are the ideas and tips you need to know.
Accessing your credit report gives you the opportunity to discover all the information credit bureaus hold on your financial history.
You can access your credit report free if:
By checking your credit report first, the knowledge and ideas you will learn about improving your credit rating will quickly become relevant, make more sense, and be more inspiring to put into place.
You can access your credit report via any of Australia’s major credit reporting bureaus using the links below:
Another option is to use Get Credit Score, which uses information from Equifax.
Please note that, although Experian completed an acquisition of Equifax in February 2016, as of April 2016 these reporting agencies continue to hold separate information and data (i.e. depending on the information held by each your credit rating may appear differently).
MacCredit uses Equifax when assessing our customer credit applications.
Once you have chosen a credit bureau and have been able to access your credit report, it is time to begin taking action.
What should you be looking for?
These are quick checks that will help you identify if your credit score is being held down by incorrect information. Conducting these will help you identify any creditors that have not been updating your credit file as they should have been, as well as if any fraudulent accounts have been opened at an old address, for example, or if anyone has attempted to open accounts using your details.
Raising Queries About Information Held on Your Credit Report
If you identify any of the errors or concerned noted in the paragraph above, you should take action right away.
The first thing you should do is query what you believe to be any incorrect entries with the creditor listed on the report. If you have or have had an account with the creditor in question, you will usually be able to resolve queries at this stage.
If, having spoken to a creditor you haven’t dealt with but appear to have had an account opened or an application for credit made with them, you have identified you might be a victim of identity fraud, you may need to contact your local police department, SCAMwatch, or IDcare to report the fraud and attain a reference number before a creditor will update your credit file.
Creditors know better than anyone the importance of credit files containing correct information, so they will usually be more than sympathetic and willing to work with you to correct any information that is inaccurate or out of date. However, creditors may also be wary of individuals looking to fraudulently remove data from their credit file, for example if they are trying to make genuine debts ‘disappear.’
If, in the unlikely event that creditors are unable or unwilling to be cooperative even if you have provided a crime reporting reference and any additional evidence, you can ask the credit bureau to update the information for you. This can take time as they will often look to verify information with the creditor in question, even if you have been able to provide a detailed outline of the actions you have taken to date.
If you have been a victim of identity fraud, consider taking out ID protection from the credit bureau you used to check your credit file. The credit bureau will then alert you in future any time a credit enquiry is made in your name.
That covers everything you need to know when it comes to checking your credit report is accurate. What are the additional steps you can now take to ensure you improve or maintain your credit rating?
Having a large number of credit enquiries lodged on your credit report can damage your credit score. Repeated enquiries are perceived as a sign of desperation for credit and an inability to manage finances in the short term, rather than as a genuine need for credit such as to make a high value purchase. As such, repeat enquiries will lower your credit score and see you perceived as a higher credit risk. You can manage this in future by:
Having credit cards with combined limits of $10,000 feels great when you have that kind of spending power and potential sitting in your pocket. If you never use your credit cards, then you’re not actually demonstrating you’re a reliable borrower and might even be damaging your credit rating. A future application may be declined on the basis that you haven’t demonstrated an ability to manage and repay a credit card balance, or because you already have access to a high value of credit therefore shouldn’t need any more.
You can avoid having credit that you don’t use by:
The biggest sign of a reliable borrower is that they have met all their credit and debt obligations by making all their repayments to creditors on time.
What circumstances might see you miss a repayment deadline?
These are all genuine circumstances and some of them have probably happened to you or someone you know. While creditors can only put a note on your credit file if you are 14 or more days late with a repayment, they still have notes on their own records, which may affect your ability to acquire further credit from them in the future.
If you do make a payment 14 or more days late, despite your account being ‘up to date,’ once it is logged on your credit report your credit rating will be damaged. As you would expect, the higher the number of late payments you have, the bigger the influence on your credit rating.
You should also be aware that different creditors might take a different approach to how they view your late payments when they manually review your credit report. For example, a mortgage lender, or ourselves here at MacCredit if you are looking at borrowing a large sum to pay for medical treatment, may take a stricter view of late payments than a mobile phone or utilities provider would.
Being able to set up a direct debit means you are always able to keep up to date with your repayment obligations. If you pay more often, not only could you be saving money by ensuring you pay less interest, particularly with credit cards, but in the context of your credit rating you are:
Although you cannot set the parameters and benchmarks of how a lender will perceive you or decide whether they will accept your credit application, you are able to control everything they see when they access your credit report. Do this by first checking your credit report on a regular basis to ensure accuracy, and then by following the steps above, while being financially prudent and responsible, to ensure that your circumstances are closer to person A than to person B in the example we explored at the start of this article.
Medical tourism, also known as medical travel, is becoming increasingly popular among Australians. What are the pros and cons of medical travel, and what can you do to ensure you have the best possible experience if you are seeking medical treatment or a cosmetic procedure abroad?
What are the benefits of medical travel?
Even when you add on the costs of a flight and accommodation before and after your treatment at your chosen location, you can save a significant sum of money by choosing to undergo surgery abroad. The main reason why surgery is cheaper abroad is due to the difference in labor costs.
The table below highlights what doctors and nurses can expect to earn in Thailand and Australia.
This difference is what enables specific procedures and treatments to be so much cheaper, while medical technology and drugs will be the same cost as they would be in Australia.
How does the salary difference reflect in the cost of treatment?
Dental Implants$3,500 – $7,500$2,300
Figures in both tables courtesy of news.com.au
We can see a significant difference in the cost of undergoing a procedure in Thailand versus Australia, and the opportunity to save money is clear. We have used Thailand as the example in this scenario as it is the most popular destination for medical tourists, as well as being the most popular medical travel destination in the world. Note that the above figures are for the treatment only, they do not include air fares or accommodation.
Depending on the procedure or treatment you need, you could find yourself on a waiting list for months, if not years, before being able to go ahead. When you begin to look abroad you will quickly be provided with dates when you can be treated, which will cut months, or maybe even years, off your waiting time, all while saving you money!
One of the biggest worries that puts people off medical tourism is that they believe the standard of care they will receive will be lower than if they were to have a procedure in Australia. However, by carefully choosing where you have your treatment, you can assure yourself of receiving only the highest levels of care.
Use the Australian Council on Healthcare Standards International (ACHSI) to help you find accredited clinics that have been verified to provide care on a par with Australian standards. As an additional way to put your mind at rest, seek out testimonials from previous patients that have had the same procedure at the clinics you are looking at.
What are the drawbacks of medical travel that you should consider before going abroad for treatment?
If you are considering travelling abroad for urgent treatment rather than a cosmetic procedure, you should consider that exposure to some diseases having not built up a natural immunity can be dangerous, particularly if undergoing treatment for gastrointestinal conditions. This is a particular hazard in countries such as Thailand.
If you choose a clinic through the ACHSI, the clinic will usually provide advice on how to stay safe and avoid exposure to certain diseases, which may involve a longer stay as a patient following surgery. Clinics that are verified by the ACHSI will also have clear procedures for complaints, as well as telling you what you can do should you experience complications after returning to Australia. You will also be able to find out about any other conditions that you may be able to be immunized against prior to visiting a different country.
When travelling to an exotic location for medical treatment, there is undoubtedly an attraction to staying on and enjoying a holiday afterwards. Doing so is not a problem so long as you have been fully discharged, although you need to be careful with how you expose any scars to the sun. Scar tissue that becomes sunburnt will heal darker and be more noticeable on your body. Ensure you choose a strong sun lotion and ensure it is suitable for using post-surgery, and ideally aim to keep your scars covered at all times while healing.
Travelling long distances post-surgery is known to increase the risk of complications. If you are planning to travel back to Australia soon after your procedure, you should take precautions to lower the risk of suffering from deep vein thrombosis or a pulmonary embolism. Although your clinic should advise you and even provide you with compression stockings, be sure to buy your own just in case you aren’t, and when flying home make sure you regularly leave your seat and walk around the cabin.
When considering the pros and cons of medical travel, is it clear that you can mitigate the drawbacks and risks by taking the time to ensure you fight the right clinic for your treatment and understand exactly what you need to do both to quicken your recovery and reduce the risk of complications. Whether you choose to travel home to Australia as soon as possible after your medical treatment or stay to enjoy a holiday, make sure you’ve planned to counter these drawbacks so you can fully enjoy the benefits of medical travel.
When looking for a payment plan, whether it is for a medical loan with MacCredit or you are looking for finance for another purpose, there are several things to consider. Probably the most important from your perspective is whether the plan you are looking at is affordable. Finance providers usually advertise their deals in terms of interest rates, so it can be difficult to understand what really is affordable for your circumstances.
What might appear to be the cheapest deal will not always be the most affordable. The key thing to consider with affordability is that it is specific to your circumstances. Finance companies advertise their cheapest or best deal to everyone, simply because they would need an individual advert for each potential customer were they to look at affordability.
As advertising by finance companies can make their products seem inflexible, you might easily be put off by an advert stating example repayment amounts that are way beyond your means. However, the example rates provided do not need to prove a barrier to you accessing finance.
Affordability is simply the weekly (or fortnightly or monthly, depending on the terms of your payment plan) figure that your circumstances mean you can afford to repay. What is affordable is therefore unique for each individual when they are seeking a payment plan. Just because a specific deal seems attractive or is affordable to one person, this doesn’t necessarily mean it will be attractive or affordable for all. You can work out what is affordable for you by taking some time to plan your personal or household budget, and coming up with your disposable income figure.
Once you know the figure that you could afford to comfortably repay, you can then tailor your shopping around for payment plans to meet this amount.
You’re searching for a payment plan as you need to borrow $10,000, and identify two different providers. Provider A offers a 15% interest rate, while Provider B offers a 14% interest rate. The immediate thought is that provider B will be cheaper. However, you also need to consider the length of the payment plan.
In this example, were Provider A offering a loan term of 60 months, and Provider B a loan term of 30 months, Provider A would be the much more affordable option, as demonstrated in the table below.
As you can see, despite Provider B likely being perceived as the best deal due to the lower interest rate, by going with Provider A you can access the financial help you need and save nearly $40 a week on the repayments.
While calculating your affordability will help determine how much you can borrow now, longer term it can help you avoid credit infringements such as missed payments and defaults.
Here at MacCredit, it is our aim to match you with the most affordable payment plan for your circumstances. We work with you to understand your affordability and will then find the best option for you. This allows us to avoid promising cheap deals or interest rates only for our customers to end up paying more than they thought they would, or feeling that a MacCredit personal loan is not affordable.
We will always look to match you with a payment plan that suits your circumstances and ability to comfortably meet your repayment obligations.
If you are looking for an affordable payment plan to cover medical costs, call us at MacCredit now on 1300 884 355.
Checking your credit score and report should be considered a ‘must do’ prior to applying for any type of credit. From large credit applications such as a mortgage or a MacCredit loan, down to mobile phone contracts and utility bill accounts, your credit file will be checked to assess whether you can be relied upon to make timely payments.
When you check your credit file, you will:
By doing this, you will put yourself in a great position for ensuring you are approved for credit in the future, whenever you need it and whatever the reason for needing it.
Australia’s leading credit bureau, Equifax, is one option you have for checking your credit file.
As noted above, Equifax is Australia’s leading credit reporting company, used by many businesses, including ourselves here at MacCredit, for the purposes of:
Employers may also use Equifax to credit check prospective employees as part of the referencing process, or prior to offering them a job, while for consumers it is a vital resource that may help improve the likelihood of being accepted for credit.
Numerous factors affect your Equifax credit file. Here is a rundown of both the widely known and lesser known factors, and some tips for ensuring your credit file always paints a positive picture of you from a credit perspective.
Making Late Payments
The most basic obligation you have when opening any credit account is to make your repayments on time. Although creditors can only place a notice of late payment on your credit file if a payment is 14 or more days late, do not allow this to lull you into taking a carefree approach to making repayments.
Defaults and Other Infringements
If you do make late payments and these are logged on your credit file, if you do not take action to get your account up to date you may default on your agreement. If you then still fail to repay the money you owe, further financial sanctions could follow. Depending on the extent to which the situation escalates, you may find yourself subject to a court judgment or even bankruptcy proceedings.
All of these outcomes, if they occur, will be logged on your credit file and make it very difficult for you to acquire credit in the future.
How do you avoid this?
By making all your payments on time, and by being upfront and honest with your creditors if you ever reach a point where you are starting to struggle to meet your debt repayment obligations.
Information and sanctions around late and missing payments are factors that most people know can influence their credit file.
What are the factors that are lesser known but that could be helping you unintentionally damage your credit score?
Your credit file contains information on all the credit enquiries you have made in the last five years. If you have made a significant number of enquiries within a short space of time – for example more than three in the last six months – this can reduce your credit score.
Repeated credit enquiries are interpreted as a desperation for credit, and may be a sign that you are a credit risk. Although it is tempting to apply for credit with a different lender if you are declined – different lenders have different criteria, after all, so you might have a better chance of being accepted elsewhere – you should check your credit file, ensure it is correct, and only apply again once you’re more sure of being accepted.
Payday loans can cause havoc with your credit file. Despite what payday loan providers say about building your credit history by using them, any benefit of repaying a payday loan on time is massively outweighed by the damage done by using them. A payday loan is a sure sign of short term financial need and potentially an inability to manage your finances. While you might be able to apply for further payday loans without any problems, when it comes to acquiring other types of credit you may struggle to be accepted.
Banks and finance providers that offer mortgages and other types of credit may even refuse an application on the grounds of you having used payday loans within a specific recent period. If you are having short term financial difficulties, look at other solutions before turning to payday loans, as they could have a dramatic effect on your ability to acquire credit in the longer term.
Make it a regular and on-going financial habit to check your credit file and ensure all the information held is up to date and correct. Be aware of these factors and how they can affect your ability to acquire credit, and you’ll find you are usually able to access credit whenever you need to in the future.
Stress is something we all experience yet deal with in different ways. Numerous studies through the years have demonstrated how stress affects us, as well as attempting to help us understand why we get stressed and also providing coping strategies for both reducing stress and the impact it has on us.
Stress can have a dramatic effect on our bodies. What are some of the main effects and how can we deal with these?
Although stress can have a dramatic impact on the inside of your body, it is often the damage done to the exterior that can lead to experiencing the knock-on effects of stress. Stress is known to dehydrate the skin; not because when you have things on your mind you forget to drink water regularly, but because when your body is experiencing stress it takes blood away from the skin and other peripheral organs in order to provide your muscles with more energy.
This is a natural bodily response, and is part of our bodies adapting to stress or fear by providing us with the energy and adrenaline to choose ‘fight or flight.’ However, when stress is on-going and continuing, the body is unable to, and does not, adapt back to its previous state. This is supposed to be a short term internal coping strategy the body uses to deal with stress quickly and effectively.
Remaining in a stressful state means your skin remains a low priority for your body, and as such it will remain dehydrated and start to affect your appearance.
Our face is the part of our body that experiences the highest level of exposure to the elements. As a result, when our skin becomes dehydrated, the effects can be more dramatic and pronounced. Dehydration of the skin can lead to wrinkles appearing quicker on our faces. Although there are some excellent moisturizing products and treatments available for our faces, these are often not enough to hide the telltale signs of stress.
Having more wrinkles on our face can lead to us looking older than we are and cause us confidence issues regarding our appearance.
The way stress affects our ability to have a good night’s sleep can have knock-on effects across our lives. Our heightened state of alertness when under stress means we struggle to wind down at bedtime, particularly as our stress might mean we’re checking our phone or tablet device, or be continually working until we literally cannot physically stay awake any longer. The quality of sleep we have when under stress is also affected, while when we wake up in the morning we’re immediately thinking about whatever it is that causes us stress, and so the whole cycle begins again.
Stress can quickly escalate when it affects your sleep, as you are aware of how tired you are, you are probably starting to think about how you look, and you feel like the only way to end the stress is to push yourself even harder in order to deal with it quicker. All this usually leads to is further stress.
A huge problem with stress is that it can prevent you from feeling like you are able to do anything about it. While it might seem difficult to be able to find time to put good habits into place, or to remove yourself from a stressful situation in order to take time out, if you’re able to do so this will represent a big step in dealing with your stress. You will also find you establish some good lifestyle traits that will help you avoid heightened states of stress in the future.
Some of the stress relief options you should consider are:
If you are stressed in a particular situation that repeats itself, such as at work, you can do things like:
Stress is a common factor in all our lives. Many people are fortunate enough to be able to work through their stress and change their lives so when they do become stressed it is dealt with quickly and effectively, using our bodies coping mechanisms in the way they were built to work. However, even those who have learned to deal successfully with stress can hold the legacy of when they weren’t so good at it. This might include wrinkles, tired looking eyes, or even weight gain if their lifestyle was either a cause or effect of the stress.
Although a new found positivity and the ability to cope with stress will help us look and feel better over time, we can access additional help to rid us of the legacy of a stressful past. This might include looking into Botox injections, a facelift, or Bariatric surgery. For anyone in this situation but unable to afford these procedures, MacCredit can help to fund the costs of treatment. Call 1300 884 355 to find out how we can help.
Debt consolidation is a popular and widely used financial solution. What is debt consolidation, what are the potential benefits of debt consolidation, and what are the different types of debt consolidation you may wish to consider?
Debt consolidation is a type of debt refinancing. When you consolidate your debts, you use a new loan to pay off all your current debts, thus consolidating your debts into one payment.
If you use debt consolidation as a financial solution for you, what are the benefits you may enjoy?
Debt consolidation is a great tool and solution for moving towards becoming debt free. However, if you use debt consolidation because you are insolvent, you may subsequently struggle to repay the consolidation loan. Also, if you continue to open new credit accounts after consolidating debts, and fail to keep up with the repayments on your consolidation solution as well as the new accounts, you could face serious sanctions including your accounts falling into default, and being subject to court proceedings or potentially even becoming bankrupt.
Here are some of the different types of debt consolidation that you may be considering, as well as a brief overview of whether they are likely to be beneficial to your situation.
Debt Consolidation Loans
A personal loan for debt consolidation is probably the most traditional and common method of consolidating debts. Many lenders offer specific debt consolidation loans, and will pay the loan out to your creditors rather than to yourself. This saves you the hassle of contacting all your creditors yourself, but also allows your new lender to protect you by ensuring the loan is used for its intended purposes.
When shopping around for a debt consolidation loan you need to make sure that the terms of your loan mean you’re definitely better off. Debt consolidation loans don’t automatically mean a better interest rate and lower repayments. If you don’t plan correctly you could easily find yourself having consolidated debts but now repaying more or at a higher interest rate, meaning it’ll take you longer to become debt free.
Balance transfers are commonly used to consolidate credit card debts, but depending on the type of new credit card you have you might be able to transfer loan balances and other credit accounts onto them.
Balance transfers with credit cards are a useful debt consolidation option if:
Under these circumstances, you would be able to repay a large chunk of your debts without accruing any further interest. Depending on how much debt you then have left outstanding, you could look to consolidate again onto another card with a promotional rate. It is crucial that you commit to repaying your debts if you opt for a balance transfer, as repeated balance transfers without actually reducing your debt in the long term can cause damage to your credit score.
Short Term Debt Solutions
Using short term debt solutions, such as payday loans, is definitely a debt consolidation option depending on your level of debt and the amount you can borrow, but it is definitely not one we would recommend. Even if you are able to access a short term debt solution that allows you to repay over 6-12 months, the interest rate is likely to be so high that you’ll ultimately pay much more than if you just repaid your creditors at your current rate.
If you are starting to struggle with debts, it is far better to be open and honest with your creditors than it is to turn to short term debt. Creditors will usually be understanding and willing to help you if you apply for hardship consideration. If you use short term debt and begin to miss payments, your debts could quickly spiral even further out of control.
When it comes to debt consolidation, consider which option is best for you under your circumstances, and in the case of balance transfers think about whether you’re able to make the necessary repayments to reduce your debt during any promotional period.
If you opt for debt consolidation, ensure that you’re set up to enjoy what should be the benefits of doing so, and not using it as a mask for deeper financial troubles or as a means of clearing up credit to use once again.