Personal loan or credit card? The best path to reducing debt.
Recent reports have shown that Australians are following a new trend, looking to reduce debts and become big savers. However, many are coming to a fork in the road when deciding on the best way to consolidate their debts, indecisive on which path will be the easiest, shortest and with the least temptation to be side tracked.
It appears the answer lies in how much debt an individual owns and how quickly they are looking to pay it off.
"The key difference between credit cards and personal loans is that loans are cheaper in the long run and impose greater strictness, with repayments that will result in clearing debt within the agreed time frame," says credit union CPS financial officer Wayne Matters.
However, Mozo's own database shows for between 6 months up to a year, borrowers could pay as little as 1 percent to no interest at all on a balance transfer credit card.
"A decision to use credit cards should be based on whether you have the cash flow to repay the amount quickly and whether you are likely to keep spending and go into further debt." according to Mr Matters.
Once borrowers have reached a conclusion on their debt reduction strategy, the next big step is to make either a personal loan or credit card comparison, to find themselves the best interest rates and beeline their path to being debt free.
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