TV adverts are always encouraging us to consolidate our debts. However, the lower payments are because the debt is spread over a longer period of time.Also, debt consolidation firms usually secure the loan against your home.Before taking out a debt consolidation loan, get free advice.
However, this strategy only works if you're on relatively good terms with your credit card company. For example, say you have a balance of £1,000 a month on a card with a 6.9 per cent interest rate and a £50 annual fee.
Unless you're already paying the lowest rate available, think about transferring your balance to a lower-rate card. That's the equivalent of a no-fee card with a 12 per cent interest rate.
Therefore, you want to transfer your balance to the new card.
Your credit card company may be willing to lower your interest rate. Cards with annual fees often have lower interest rates, but do some sums to make sure they're worth it.
This could mean you lose your home if you fail to keep up payments.