Could secured loans help those with credit card debts?

Those with credit card debts may end up paying a fortune these days. This is because the interest rates on many of today's credit cards are very high, and in addition to this many card issuers have started adding a range of additional charges from annual fees and increased foreign fees to higher cash transaction fees and more. In addition to this, those that miss payments or exceed their credit limits also get charged a penalty fee, although this is now at twelve pounds at the most following a ruling by UK financial regulators last year.

Because of the potential level of charges that could be added to credit card debts, homeowners with multiple credit cards on which they tend to spread repayments may actually find themselves better off with a secured loan. These loans are available at competitive rates, and by taking out a secured loan credit card holders can consolidate their various cards, thus avoiding costly interest charges, late payment fees, and various other charges that are applied by today's card companies.

Although not all credit card users will benefit from paying off their cards with a secured loan – for instance those with just one or two cards with low balances, and those that clear their card balances each month will be better off continuing with their cards. However, cardholders that are struggling to keep up with repayments and those with a number of high interest cards with high balances could see their monthly outgoings fall and could find financial management easier through consolidating with a secured loan.

According to experts much of the stress and financial difficulty that is often linked with trying to clear credit cards could be avoided by using a secured loan to wrap all of these debts up into one larger debt. This reduces the chances of getting charged for going over the limit, and for late payments, as the repayments on these loans are more structured and easier to manage.

Tom Smith
5th July 2007