Personal Finance, Business and Finance Solution

If you find yourself in a position over the coming months where you need to make a large purchase, say one in excess of ?5,000 and you do not have the funds readily available, then the most realistic options you have are to either take out a personal loan or apply for a credit card.

The sad news on both of these fronts is that neither is going to prove inexpensive, the credit crunch has meant that those that do make it through lenders’ stringent criteria are also likely to end up paying through the nose in interest.

For instance, two recent studies have shown that 14 loan lenders have increased their personal rates in the last month alone and there has been an average interest rate hike of 0.6% on many standard credit cards. This does not mean that finding affordable finance has become impossible though, for those willing to invest a little time and effort there are competitive deals out there.

If you know that the ?5,000 you need cannot realistically be repaid any time soon and you have no desire in chasing the best credit card rates than a loan is likely to be your best bet. On top of these advantageous factors, for the most part they also offer much lower rates than the average credit card, with 8% being the current market leader.

If you would rather opt for the credit car option, then you need to be prepared to switch. Here you have two options; you can either keep on switching; or switch just the once. The first of these options generally involves getting a 0% on purchases card to buy your purchase, and then once this term is up, move the balance to a 0% balance transfer rate card. The latter of these cards generally offers 0% interest for about a year, some as long as 15 months; either way, to avoid incurring interest you will have to switch before your term is up.

The second option, similar to the first involves using a 0% on purchases card but this time round you transfer your balance over to what is known as a lifetime balance transfer card. As the name suggests the rate of interest stays at a set rate for the lifetime of the outstanding balance.

There are various pro’s and con’s to each, such as the transfer fee incurred when moving your balance from one lender to another, this alone will usually help you decide which option is the best for you. If you are still stuck, then it’s probably best to talk with your bank or an IFA (Independent Financial Advisor).