For people in the UK who may be struggling with the repayments on their personal loans and credit cards, there are various solutions available to them in order to reduce their repayments and get the equivalent of a cheap loan.

One option which is readily available to someone with a number of loan and card debts, is a debt consolidation loan, which can pool a number of debts into one low rate loan with a single monthly repayment.

An alternative to a debt consolidation loan, for those with credit card debts, could be a balance transfer credit card, which offers a reduced rate or zero per cent interest on the debt for a limited period, but usually with an initial transfer fee.

Over the course of the past couple of years, there has been a large increase in the number of balance transfer credit cards entering the market, with some increasingly attractive offers to compete with any cheap loan.

The number of balance transfer cards which offer zero per cent interest for at least 13 months has increased by around 162 per cent in the last two years and some of the best deals will allow interest free balances for up to 20 months.

On the down side, for someone with high levels of credit card debt, the new card may limit them to a maximum credit balance less that their outstanding debts. Also the debt has to be repaid in a relatively short period of time in order to avoid paying high interest charges on the card once again.

For larger levels of loan and card debt, a debt consolidation loan should still be a serious consideration, as there are plenty of cheap loan deals available on the market at the moment and the repayments can be spread out over a longer period than any balance transfer credit card.

Although the base rate of interest from the Bank of England is at its lowest level in the history of the bank, at just 0.5 per cent, the cost of borrowing money seems to be increasing all the time, particularly on small unsecured loans and credit cards.

New research from the independent analyst firm Defaqto has found that the average rate on a typical credit card has increased dramatically over the course of the past four years, with the average APR (Annual Percentage Rate) now standing at 18.7 per cent, compared with just 16.6 per cent in July 2007.

Interest rates on credit cards can also be confusing and vary depending on the type of borrowing they relate to. For example, the rate on a balance transfer could be different to that for purchases on the card, with a different rate again for cash advances on the card and in many cases, the cheapest debt is repaid first, leaving borrowers paying interest for longer on their more expensive debt.

Whilst many borrowers will consider a zero per cent balance transfer deal to another credit card, these are now becoming quite rare and are usually only available to those borrowers with the best credit rating.
An alternative option could be a debt consolidation loan, particularly for those people with several credit cards, overdrafts and small unsecured loans, all of which carry high interest rates.

A debt consolidation loan can work out to be a particularly cheap loan option for someone in this situation, particularly if their combined debts are for more than £7,500, as personal loans, even on an unsecured loan basis, are significantly cheaper above this amount.

For a debt consolidation loan of more than £7,500 a borrower could well get a cheap loan rate of less than 10 per cent, which would save them a significant amount of interest on their current expensive credit card debts. 

There has been a growing reliance amongst many consumers on Pay Day loans in recent years, with a large number of people taking out these loans in order to see them through to the end of the month and their next pay cheque.

Although Pay Day loans are an extremely expensive way of borrowing money, the cost can be mitigated if the loan is repaid within the first month, as is the intention with this type of loan.

However, many borrowers are failing to repay their Pay Day loan within this term, thereby incurring huge interest charges which often mean that they are never likely to be able to repay the original loan debt.

Attempting to keep up with Pay Day loan repayments, when someone is already struggling to cover their monthly bills anyway can be an almost impossible task, leading to the borrower taking out more loans of this nature and an inevitable downward spiral of unmanageable debt.

One option for someone in this situation could be to take out a debt consolidation loan, which would pool their existing outstanding loan debts into one cheap loan with a single lower repayment amount each month, although this option is usually only available to those borrowers with a good credit history.

For someone who has a damaged credit history, through missed payments, County Court Judgement’s and loan arrears, a debt consolidation loan may not be a solution and they may have to consider alternative options, such as a debt management plan or an Individual Voluntary Arrangement (IVA).

For someone who finds themselves struggling with Pay Day loan or other debts, the first course of action is to seek professional advice from a Financial Adviser, who will be able to offer help and advice on the best course of action to suit a particular individual’s needs.

The cost of having an outstanding balance on a credit card has increased significantly since the start of this year, according to the latest figures from the price comparison site Moneyfacts.co.uk, with 18 card providers increasing their interest rates, compared with just four over the same period last year.

Eighteen of the UK’s credit card providers have increased their rates so far this year, with increases ranging between 0.6 per cent and 2.0 per cent. Although this may not seem like a huge rise, the average rate on a typical credit card now stands at 19.1 per cent, which is the highest rate in the last 13 years.

Whilst there are still some new credit cards which offer a zero per cent balance transfer offer for new customers, these are becoming more rare and lenders are more reluctant to offer these sort of deals to many borrowers.

This could mean that the best option for someone with a large outstanding balance on their credit card, particularly if they are only making the minimum repayment each month, could be to take out a debt consolidation loan, which could work out significantly cheaper than their current card and guarantee the full repayment of the loan debt.

There are many different options for a debt consolidation loan, with plenty of competitive cheap loan options, particularly for those borrowers with larger card or loan balances in excess of £7,500, as loan rates are much cheaper above this level.

A cheap loan for debt consolidation purposes could save a significant amount of money for a borrower, both in their monthly repayments and over the term of the loan, but it is important to remember that the debt has not gone away and they should be careful not to run up a new balance on their credit card again.

Now the nice weather has suddenly arrived across the UK, people’s attitudes seem to change as they look forward to the summer and many take on board a refreshed positive attitude towards mundane jobs, such as spring cleaning the house, for example.

Whilst the joys of spring continue to enthuse people to do things they might normally put off, now is an ideal for many to revisit their financial situation, with regard to things like whether or not they are getting the best deal on their home owner loan, personal loans or credit cards.

Reviewing their loans and personal finances in general seems to be one of those jobs which nobody enjoys, or wants to do, but by going through your finances with a fine tooth comb could free up a significant amount of spare disposable income for more interesting things, such as holiday spending money.

For people who have several outstanding personal loans and credit cards, with a few years remaining on the loan term, a debt consolidation loan could be a good way of tidying up their debts into one simple monthly payment, which could save them money both on a monthly basis, as well as over the long term of the loan.

Many home owners have remained on their existing lenders standard variable rate loan long after their initial deal has ended, believing that they are on the best loan deal available, or that they won’t be able to get an alternative home owner loan at a competitive price in the current economic conditions.

For those individuals in this position, taking a little timeout in order to review their loans and other debts could be a worthwhile exercise and save  them a significant amount of money over a relatively short time. If in doubt, they should seek advice from a professional financial adviser, who will be able to help them make the right decisions.