If you feel you are being charged too much interest on your debts as your rate is too high, then you have various options open to you.
A balance transfer – moving the amount you owe to a different product – is one of these. The key here is to find a product with a lower interest rate than the one you are currently subject to, and switch your balance to this, paying off your original loan.
However, most creditors and products will charge you an upfront fee for doing so, typically around three percent, and you will be liable for interest at whatever the rate on your new product is set at. You may be able to find a few zero percent fees and zero percent interest deals available, meaning you pay nothing for the service. However, be wary, and budget to pay off the balance before the zero percent promotional time period ends, otherwise the interest is likely to sky-rocket, potentially leaving you paying more than you were originally.
Be wary also of taking out a new loan to cover your old one – check the small print, as loans can be secured against your house, meaning you run the risk of repossession if you default on payments. If you have savings, you may want to consider reducing your loan to a manageable level, to reduce the amount of chargeable monthly interest. Check there are no early repayment clauses before you do.
It is always better to confront your debts. If you are feeling overwhelmed, you should seek free, impartial and expert advice from a charity such as the Consumer Credit Counselling Service. Call 0800 138 1111. They can help by setting up a sustainable repayment plan.
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