Many Australians are looking to reduce personal debt and save more but are seemingly unsure how best to consolidate their debts to achieve this.
According to Wayne Matters, a financial officer with CPS credit union the decision on whether to use a personal loan or the option of the zero interest balance transfer available on certain credit cards on offer as a means to consolidate debt depends on how much a person owes, and how soon they are looking to pay it off.
Mr Matters says that the key difference between personal loans and credit cards is that personal loans usually have a lower interest rate and are therefore cheaper in the long run and impose a greater discipline in repaying the debt within an agreed time frame.
However with some lenders offering between zero and 1 per cent for between 6 months and a year on credit card balance transfers, borrowers could also take advantage of the no interest to as little as 1 per cent to accelerate payments during that time which would make a substantial contribution to paying off the debt.
Mr Matters cautions that a decision to use credit cards should be based on whether you have the cash flow and are disciplined enough to pay the debt off quickly and not be tempted to keep spending on the credit card and get further into debt.