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Get money fit in 2014 for a new year and new you

7th January 2014 Print

Faced with a New Year and a new start, many people may be worried about existing debts and any additional costs they’ve piled on during the festive period and over the course of 2013. Consolidating and clearing those debts in a sensible way should therefore be part of New Year’s resolutions, says MoneySuperMarket.com.
 
Money worries are on the rise. The comparison site asked consumers what they feel most stressed about on a daily basis, and the results reveal that money worries are the main cause for concern for a third (36 per cent) of UK adults. This number has been on the rise year-on-year with 30 per cent stating money was their biggest worry in 2011, and 34 per cent in 2012.
 
Furthermore, a poll by MoneySuperMarket found that eight per cent of consumers would be turning to a credit card or loan to fund their Christmas expenditure because they had no other option, but will now be faced with the challenge of having to pay off those costs.
 
For those who cannot afford to repay the debt this month, they should look to transfer their Christmas balance to a new zero per cent balance transfer card, and think carefully about how to budget throughout the year in order to pay off the debt quickly. Already this year, there has been a number of new market leading credit card and personal loan product launches which are ideal for anyone looking to consolidate their debts. For example, Barclaycard has launched the longest ever balance transfer deal on credit cards offering 0 per cent for 30 months, while M&S Bank has launched its lowest ever loan rate of 4.7 per cent APR.
 
Kevin Mountford, Head of Banking at MoneySuperMarket, said: “The New Year provides the perfect opportunity for people to tackle their finances and get themselves ‘Money fit’. Many households will be facing hefty credit card bills this month, especially if they have had to put the cost of Christmas on plastic, but no matter what the financial situation looks like, it is vital consumers tackle their debts head on so they don’t spiral out of control later in 2014.
 
“Taking just a few minutes to review your funds is the first step in tackling debt. It is important to work out how much you can realistically afford to repay every month in order to find an appropriate product- this will help to ensure credit card debts are cleared in the most efficient way possible. For example, moving existing credit card debt onto a zero per cent deal is one option to help save money. For those people who are unable to switch to a new product due to a poor credit history, it may be beneficial to speak to one of the free debt advice charities who may be able to help you get into a position where you can tackle your debt problems.”
 
For those looking to switch credit cards, MoneySuperMarket offers the following top tips:

1. Plan a realistic budget to pay off debts. If you are looking to switch your debt to a zero per cent deal then aim to pay it off before the balance transfer period ends, and ensure you can afford the monthly repayments to clear the debt. Moving £3,000 to the market leading Platinum Credit Card with Extended Balance Transfer  from Barclaycard offers zero per cent interest for 30 months and would save £992 over the interest free period.

2. Check the small print for transfer fees as many providers charge a fee when moving onto a zero per cent credit card. Balance transfer fees vary between providers so it is worth checking before you apply. Ensure you are able to transfer a balance. Anyone looking to switch credit card debt should check whether they are allowed to transfer their balance to a new provider. Some providers prevent the transfer of existing debt to other cards within the card issuers group.

3. Check your credit rating. Make sure you have a good credit rating before applying for a credit card to avoid rejection or being offered higher rates than expected. Even a good or excellent credit rating may not necessarily guarantee card acceptance.

4. Switch to a low rate card - If you cannot afford to repay a debt on a zero per cent card within the zero per cent period then consider switching to a low rate credit card. Switching £3,000 to the market leading low rate credit card from Sainsbury’s Bank at 7.8 per cent and repaying £100 per month would take 35 months to clear the balance and save £582 in interest.

5. Check the credit limit you need. Even if you are accepted for a new deal, the credit limit you receive may not cover the entire balance you want to switch. If this is the case, then transfer as much as you can and then focus on paying off the remaining balance on your old card as quickly as possible while maintaining minimum repayments on the new one.

6. Paying off the balance. If you are unable to move your Christmas debt, then aim to pay off the balance as quickly as possible. Paying off £150 a month on a £3,000 balance on a card with an average rate of 18.15 per cent would take two years. If you have more than one credit card, then pay off the most the debt that is accruing the most interest charges first, but don't forget to pay at least the minimum of the other cards.

7. Personal loan options. For those unable to find a new card deal it may be worth considering a personal loan. A loan allows consumers to make fixed repayments over a set period of time which is ideal for anyone looking to budget. The best personal loan deals are only available to those with good credit histories. For those with poorer credit histories and equity in their homes, a secure loan may be another option.

8. Review outgoings. If you are unable to switch to a cheaper deal and cannot afford to service your existing borrowing then look at alternative ways of paying off your debts. Review all of your outgoings and try to free some cash which can then be used to pay off debts. Concentrate on repaying the debt with the most expensive interest rate first as this is likely to be costing the most.

9. Don't bury your head in the sand. If your debts are unmanageable then seek immediate help from one of the free debt advice services such as Citizen's Advice or Step Change who will be able offer help and advice.