In almost all debt situations the question of taking out a further loan to repay a debt will confront you. The advice you will receive from most debt counsellors would be an emphatic ‘NO’. But that is not always the most realistic answer to debt. Sometimes taking out a further loan can be a good long-term answer, as well as an obvious short-term solution. If you only pay the minimum monthly payment on your credit cards, there is no end in sight and you will often find yourself re-using the card each and every month therefore the debt is never being reduced. Most personal loans will usually have interest rates lower than the credit card and you can determine how long you want to repay it back, therefore you know when you will be debt free. If you do decide that a consolidation loan is the way forward then make sure you use it as intended. All to often people start with good intentions and pay off their credit commitments only to build them back up again or when presented with a vast amount of available money in their bank account get carried away and use it for purposes not intended and then find themselves with twice as much debt as before with twice the repayment burden. If you do get a loan that has comfortable repayments and can clear your debt off treat it as a second chance not as an opportunity to go out and splash it on a new car or a holiday.
Do not be tempted to start using the credit cards again now that they are at zero balance. Your creditors make money out of you borrowing money from them and believe it or not don't like to see you pay up early. They want you to continue making minimum payments indefinately and will do all they can to encourage you to start using their credit facilities again by offering interest free promotions, higher card limits or even cards with posh sounding names like platinum to make you feel important.
The financial institutes employ thousands of marketing staff on high salaries to entice you to spend money you may not have, be careful.
Manage your money:
You need to separate your essential household bills from your personal living costs. So if your income goes in one bank account, open a second account with another bank. Total the amount of your households bills and keep this amount in your first account, the remaining money (living costs) should be transferred to your second bank account. Have at least one of the accounts clear of debt ie no overdraft, credit cards or loans so you will always have a safe haven for your income, it is never a good idea to owe money to the bank where your income is paid into. Set yourself a weekly cash amount for shopping and day to day living expenses, it is amazing how much you won’t spend when using cash! Paying by card is too easy, you will get carried away and purchase items which you don’t really need. At the end of each week, if you have cash left, set yourself a lower limit for the next week or put the unused cash into a savings account.
If you get into difficulties then remember the first bills to pay each and every week or month are:
Mortgage/Rent
Utility bills (Gas, Electricity, Water and Council Tax)
Any secured loans or hire purchase agreements.
These are your essential commitments that will keep a roof above your head, your car on the road and the bailiffs from your door.
If you default on payments to your house you may lose it if you have to default on your credit card in order to pay your mortgage you may lose the use of your credit card, I know which one we would prefer to lose.
