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Take care of debt with a low-rate loan or a 0% credit card

If you want to consolidate your debts, or perhaps accumulate underestimated DIY costs during the holiday weekend you want to clear now, you want to make sure that you pay the lowest possible loan rate. Fortunately, borrowers can find rates as low as 6.4% on the best small loans (based on a £ 3,000 loan over three years), although it is quite possible to pay no interest – this is where 0% credit cards come in.

Save hundreds with a 0% card

Save hundreds with a 0% card

The latest analysis by Moneyknows reveals that rather than opting for a small loan, borrowers might consider one of the longest credit cards with interest-free introductions or even a shorter-term card but no fees. which could save them hundreds of pounds in interest. Whether it’s an acquisition card, a balance transfer card or even a money transfer offer, consumers can spread the cost of their debt in many ways.

The table below shows the amount of interest consumers could pay if they used a 0% loan or credit card to cover a lump sum of £ 3,000. As you can see, the savings realized with a 0% transaction can be marked:

Why choose a loan while 0% offers are cheaper?

Why choose a loan while 0% offers are cheaper?

The fact that debt consolidation on a 0% card, or even the use of a 0% acquisition card, is much cheaper can lead people to wonder why they would like to consider opting for a personal loan. Well, “it is advantageous to choose an unsecured personal loan on a credit card, basically under the strict terms of monthly repayment,” “These loans are ideal for borrowers who wish to have the guarantee that their debt will be repaid at the end of their contract.”

Essentially, a loan has the distinct advantage that repayments are fixed, unlike credit cards, which means borrowers can be safe knowing they will no longer be in debt by the end of the term. Conversely, credit cards ensure that the borrower himself makes sufficient repayments each month – without spending more – to ensure that he will no longer be in debt by the end of the period. interest, which means there is no guarantee that it will be.

That said, “If a borrower opted for an interest-free credit card, he could save hundreds of pounds if he fully paid off his debt before the expiration of any 0% transaction,” said to be more organized.

Stay on top of your repayments

Stay on top of your repayments

For example, on the basis of an average rate of 14.3%, a loan of £ 3,000 over three years would cost a borrower £ 706.94, although rates as low as 6.4% would bring the borrower back total interest at £ 296.16. However, it should be kept in mind that not all borrowers will be offered the advertised rate – suppliers should only offer this service to 51% of successful applicants – and the best offers are those of the candidates. online. a branch means that consumers can miss out.

However, as shown in the table above, it is perfectly possible to significantly reduce the amount of interest paid, or even to avoid any interest, using instead a 0% transaction. However, as points out, “One of the biggest dangers of using a credit card for short-term borrowing is obvious: you have to keep up with the pace of repayments. lower the monthly repayment to the minimum required to release certain expenses, but if you do so for a long time, the debt will be suspended longer than expected, which could result in higher interest payments, but it is always wise to increase as much as possible to be able to pay debt faster.

“For example, if a borrower had a typical debt of £ 3,000 on a credit card bearing an interest of 18.9% APR and only paid back £ 100 a month, he would incur interest of £ 970 and would be suspended for three years With a 0% agreement, £ 3,000 can be paid in 25 months with fixed repayments of £ 120 without interest charges, but if customers can claim £ 30 extra per month (£ 150 per month) ), this falls to only 20 months “.

However, whether it’s an interest-free purchase, a balance transfer or a credit card with money transfer, it’s important to keep in mind that many of the best deals can charge for the conversion of a debt, which can erode savings. Therefore, you will want to make sure that you calculate the numbers first, because choosing a high-cost contract can be an expensive mistake. Ideally, look for cards that charge no fees.

“In addition, in order for consumers to have the best chance of getting one of the most lucrative offers, it is important that they place themselves in the best possible financial position before applying for credit,” he concluded. “Regularly reviewing a credit report is a good idea, and it can be done for free, as with Experian, where consumers can quickly and easily access their financial footprint.”

 

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