Should credit crazy Aussies consider personal loans?

New RateCity research has lifted the lid on a nasty spending habit in Australia – credit card splurges! And while it’s hard to get by without a credit card these days, many Aussies are missing out on saving thousands because they are turning to their piece of plastic for their borrowing needs – instead of comparing low-interest personal loan options.

Twenty is the new worry age for financial debt, as young Australians sign up for their first credit cards earlier and earlier. Our data revealed that 42 percent of young people under the age of 24 have between $10,000 and $30,000 of personal debt, not including a mortgage.

So in the age of spend now, think later; how can personal loan options assist to curb the impulsive credit card borrowing trend?

Consolidating your debt

If you are finding yourself knee-high in debt, with a couple of credit cards to manage – consider consolidating your credit card debt with a personal loan.

Look for a low interest rate personal loan so you can roll over all of your debt into the one low-rate loan. This way you will be better able to manage your debt, pay it off and monitor further expenses.

Something to remember is that some credit card providers advertise balance transfers with zero percent interest for a set period of time, which may seem like an appealing option – but only for the disciplined. If you can commit to paying off your debt in the set zero balance period – this could be a valuable option but be aware, after the set period expires, the credit card revert interest rate will be much higher. So do you research and make sure you are committed to paying it off in time. 

Credit card balance transfers can also be a great way to get on top of your existing debt – if you can commit to restricting your spending and making regular repayments. Always compare both credit card and personal loan options to find which one will suit you.

Controlled repayments

If you have a tendency to overspend, splurge or succumb to impulse buys and you have trouble paying off your credit card each month, then a personal loan may be better suited to you.

Personal loans have set repayments so you will be forced to regularly pay down your debt – a great thing for impulsive spenders.

Fees and charges

Personal loans often have lower interest rates than credit cards but make sure you check the fees and charges. Fees and charges will impact the overall amount you pay off your loan so make sure you compare a range of personal loans to find one with a low interest rate, as well as fees and charges.

Borrowing term

How long do you plan on taking to pay off your loan? If you don’t have the funds upfront to pay for your big purchases on your credit card, you may be better off looking for a low interest rate personal loan so that you can pay if off over time but not incur hefty interest rate charges.

Just remember, the longer you take to pay off your loan, the more you will wind up paying in interest.

Choosing between a credit card and a personal loan will come down to your personal situation, spending habits and the size of the debt you carry. As always, run a comparison online to compare your borrowing options, so you can find a great low-rate deal and get back on top of your debt.

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