If you are considering about making any large financial decisions this year, it is important to manage your personal debt to ensure a good financial situation. This can include looking at refinancing or buying a new house or investment property.
In this article, we will consider credit card debts and how to eliminate them.
How can you finally pay off your credit card debt?
Firstly, free yourself from the jail of your credit card debt.
Credit cards are incredibly flexible and popular among Australians for their additional spending money. When applying for a credit card for the first time, the thrill of free frequent flyer miles, bonus points, or “free” gift cards sets in. But for many people, it won’t be long before that brand-new, shiny piece of plastic is giving you a lot of unnecessary tension and concern.
Put paying off bills first.
You should think about your options for paying off your debt or consolidating it into one loan with a lower interest rate if you have one or more credit cards that are maxed out. The interest you are getting seems to never stop.
It would be wise for you to prioritise paying off your secured debt first when it comes to debt repayment. The order of elimination is then planned using any additional resources.
A loan that is secured by your house or car is referred to as secured debt. These payments are very important because if you don’t make them, a lender may take your house or car away, making it very hard to live. To safeguard your credit rating, make sure you make the minimum payments on any obligations.
Once you have paid off your secured debt, you can concentrate on paying down your credit card debt or plan how to completely eliminate it.
Balance transfers: are they a wise move?
You have probably seen advertisements from many lenders promising “0% transfers” on balance transfers for the first 12 to 36 months. As long as you don’t charge any more purchases to your balance, this might be a successful strategy for paying off your credit card debt.
You should exercise caution because some lenders charge transfer fees that are calculated as a percentage of the sum. In addition, they may say in their terms and conditions that the balance transferred must be paid back within a certain time period, if not, they will add the interest rate to your balance.
To ensure that you have paid back the full amount by the end of the interest-free period, you will usually need to pay more than the minimum amount. Calculate and avoid being caught in a trap!
Please avoid damaging your credit report.
Although they shouldn’t be a constant answer, balance transfers can be a useful choice. They should primarily be utilised as a method of paying down your debt on your credit card.
You could get into difficulty if you plan to transfer your credit card debt from one lender’s interest-free offer to the next and then the next.
Credit applications are required to transfer credit card debt. These credit enquiries all appear on your credit report. Your credit score could suffer as a result, and a lender may judge your future home loan applications differently as a result. In general, your lender will see you negatively the more enquiries you receive. Hence, exercise caution.
Debt consolidation can be an option for your mortgage.
Debt consolidation may be a good choice for you if you feel as though you are drowning in credit card debt.
You might have to restructure your present mortgage in order to take advantage of this option. You may be able to refinance any personal loans, credit cards, or store cards into your home loan, depending on how much equity you have. This would give you a reasonable monthly payment with a lower interest rate (perhaps 5.5% for example) compared to the average 19% credit card rate.
Remember, before making decisions or acting without fully understanding your range of possibilities, speak with us first as your finance professionals. We are knowledgeable about the debt consolidation strategies that may be available to you.
