Using a loan to reduce your monthly outgoings – it can be done

Using a loan to reduce your monthly outgoings - it can be done

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Cutting back on fripperies and keeping a beady eye on the household budget has become a major preoccupation for many UK consumers seeking to ride out the recession without incurring additional debt and financial hardship. Yet, no matter how canny you are at budgeting for the now, for those with high levels of previous credit and store card debt, the interest rates on cards can make reducing the balance a tall order. This is because with old debt, a high proportion of monthly repayments goes to paying off the interest and not the actual borrowed capital.

With so many essential financial commitments to juggle, it's all too easy to feel overwhelmed.

The essential tip for managing personal finances is to remember to stay calm - and that there are numerous support and advisory agencies that can help you, should you find yourself getting into trouble.

The UK's leading advisory charity, the Consumer Credit Counselling Service (CCCS) urges consumers to take stock and seek help if they need it well before debt spirals out of control. It offers a free and confidential counselling session online and a debt management plan service, as well as advice on setting and managing your budget.

Preventative measures

If, like many Britons, you're struggling to manage your mortgage repayments, a tidal wave of household utility and essential home and car insurance bills, as well as your credit card debt, it is vital to have a clear picture of what you're up against:

Always keep up with financial correspondence, check bank statements and regularly check the balance of your current account.
Set a realistic monthly budget for all household expenses and standing orders and stick to it. Also be sure to factor in budget for irregular bills such as your car MOT and contingency for 'surprises' - such as emergency dental treatment or replacing household appliances.
Write down everything you spend money on to help you revise your budget and get firmer control over spending on non-essential items.
When you're out shopping, always ask yourself if you really do need the item you're coveting before buying. It pays to exercise self-control.
Use direct debits for paying utility bills and other regular monthly commitments - it may give you small discounts.

Card wise

If you have more than one credit card, work out which needs to be paid off first or which requires to be cleared with larger monthly repayments depending on the level of the debt and interest rate.
Stop using your credit cards as a payment method to avoid getting into further debt.
Investigate all the 0% balance transfers currently available, check the handling cost of transferring your existing balance to a new card, and then move balances to take advantage of interest free deals offered for the longest terms with the lowest handling fee.

How to consolidate your debt

Some UK customers are opting to take out a personal loan, which can offer an effective means of reducing your outgoings by consolidating your debt into one manageable monthly payment.

As the problems caused by the credit crunch start to receive, some consumers are finding it easier to access unsecured personal loans. Barclays is currently offering its existing customers a lower rate for loans typically 10.9% APR.

In order to assess whether a personal loan would be the right option for you, add up your total monthly repayments, including high interest overdrafts, cards and other loans and check whether you would pay less for a consolidation loan. Depending on your circumstances, a lower interest personal loan, which consolidates debts, could help you to set up a more manageable debt repayment programme.

If you are a Barclays Current Account holder you'd like to find out more about a personal loan from Barclays, please visit www.barclays.co.uk/loans

The information given in this article was correct as 27/04/2010. It does not, however, take account of any changes in regulations, the law or interest rates since that time.

This article is not a substitute for obtaining professional advice from a qualified person or firm.

Examples given of products and services are not exclusive. Other companies may provide the same products and services, and inclusion of a product or service should not be taken to indicate that Barclays recommends it over any similar product or service.

Barclays Bank PLC is not liable for any third party opinions expressed. While every effort has been made to ensure that the information contained is accurate at the time of publication, no liability for damages is accepted by Barclays, the publishers or any other organisation or person providing information, arising from any errors or omissions that may appear, however caused - or from any editorial alterations to submitted information. This is not intended and will not affect any liability of Barclays under the provisions of the Financial Services and Markets Act (2000.)

Barclays is a major global financial services provider engaged in retail banking (current accounts and savings accounts), credit cards, corporate banking, investment banking, wealth management and investment management services, with an extensive international presence in Europe, the Americas, Africa and Asia. With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs over 140,000 people. Barclays moves, invests and protects money and provides personal loans, home insurance, life insurance , mobile banking and other services for over 49 million customers and clients worldwide. For further information about Barclays, please visit our website www.barclays.co.uk