How to pay off Christmas debts with a debt consolidation loan

After Christmas, many Australians start to feel the debt pain after overspending during the festive period. Racking up credit cards is the most common problem, but there are a number of ways to get your finances back in order. Let's discuss two of the most common ideas, first, applying for another credit card and second, taking out a debt consolidation loan.

Is taking out another credit card a smart move?

Many websites suggest taking out another credit card that currently is offering a 0% transfer, which sounds like the perfect solution but there are a number of things to be wary of if you are considering this. They are:

  • What if you don't repay the entire debt during the 0% period?

This is exactly what the credit card company is hoping for. As soon as that 0% interest rate finishes, whatever is outstanding goes onto the standard interest rate. So you are back to square one with a credit card debt you may struggle to repay.

  • You fall into bad habits and start using the credit card

Again, this is what the credit company wants to happen. Your intentions of simply repaying the card off and clearing your debts have somehow vanished, and now you have put yourself into an even worse debt position with no clear way of repaying the credit card debt.

Why would a Fair Go Finance debt consolidation loan be a smarter option?

There are a number of reasons why a debt consolidation loan is a smart option worth considering when you want to clear your Christmas debts once and for all. Yes, you will pay interest straight away on a debt consolidation personal loan unlike the 0% credit card however there are a number of benefits that definitely counteract this which are:

  • Your debt is guaranteed to be repaid

With any type of personal loan, it is taken out over a set time period and is designed so that the debt is fully repaid. Unlike a credit card which always has the temptation of using it again, a debt consolidation loan can never be redrawn - the only option is for you to repay and close it.

  • Credit cards can be stolen

With fraud on the rise, credit card details are increasingly being stolen. If your intention is solely to clear an outstanding Christmas debt, why risk having another credit card? By having a debt consolidation loan you never have to worry about it being accessed fraudulently.

Our final tip

When you have built up a large amount of debt over Christmas, it is very important to get your finances back on track as soon as possible. Consolidation of your debts is a great start, but make sure you consider all of the above points before you choose between a credit card or debt consolidation loan. Remember to stay focussed on repaying the debt until it is completely repaid and perhaps be a bit more sensible with your money during the next festive season!

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"Although I had fallen in hard times in the past, they were willing to look past that & give me a Fair Go. Friendly service & nice people to talk to. Thanks guys and girls!"

Daniel, February 2016