The new year is a good time to consolidate your debts

It’s round about now that many of our New Year resolutions start to fall by the wayside. But one resolution you might want to consider committing to is consolidating your debts.

Spending just a little bit of time seeing if you can pay less for your borrowing is a great way to feel better about the approaching 12 months while saving some extra cash at the same time.

The interest charged on credit-card debt varies widely. But depending on your credit score, there are plenty of 0% balance-transfer rates available at the moment, so it’s worth seeing if you can shift any large balances on to a new card and cut your monthly repayments.

If you have more than one outstanding balance, shifting them all to one new card will also mean you have to make only one repayment each month, and it will be easier to manage your finances.

However, an alternative option for consolidating your debts is via a personal loan. Unlike 0% balance-transfer credit cards, this won’t be interest-free, but there are some very low rates available at the moment and some people prefer the certainty of regular monthly payments being taken automatically from their bank accounts.

Stats from Moneyfacts show that the average rate on an unsecured personal loan at the moment is 4.6% (based on a £10,000 loan over five years), while some of the best deals on the market are available for less than 3%.

“It’s clear to see that personal loans can be a popular choice for borrowers looking to consolidate their debts, and as we enter the new year there may well be those hoping to rein in their credit-card debt by moving it over to a more manageable loan,” said Rachel Springall, of Moneyfacts.

“There are pros and cons to doing this. With a credit card, borrowers can change their repayments from a fixed payment to the minimum repayment in times of crisis, but with an unsecured personal loan borrowers must be sure to keep up with the set repayment each month.

“However, a loan could be perfect for those who can’t resist the enticement of using more of their credit card limit and who need a sensible product to pay back their debt over a fixed term.”