Clear your debts for less

Now that the festive season has come and gone, it's time to start facing the reality of your spending. Some of you may have been able to stick to a budget but for others, the presents, travelling or nights out may have increased the strain on your wallet.

We all do it - we use our credit cards and dip into our overdrafts before Christmas, convincing ourselves that we will pay them off in the New Year, but that rarely happens. In fact, research from Santander found that 3.6 million Brits are still paying off £1.01 billion from last Christmas.

Insolvency trade body R3 found that more than five million Britons borrowed money to pay for Christmas this year and estimates that it will take one million people over six months to pay off this debt.

Don't panic, there is a way out. Lenders have revealed some of the most attractive deals in recent years as Barclays has extended its 0% balance transfer deal to 17 months and a rate war in the loans market has made way for a 7.3% APR unsecured loan.

Consolidating your debt with a loan or a balance transfer card could help ease your financial strain. Santander revealed that cardholders plan to shift £2.8 billion of credit card debt in 2011 with an average £1, 015 a customer.

If you're struggling to pay off your debts you could potentially make life easier by switching to a credit card with a 0% balance transfer deal, when used tactically it can make great financial sense.

These cards give you an opportunity to consolidate your debts, allowing you to make interest-free, manageable payments while avoiding big interest rates. So if you have significant debts on existing cards, switching to a balance transfer deal could save you hundreds of pounds in interest payments.

That is, of course, if you can pay off the balance within the interest-free period without incurring interest on any other payments on the card. Fail to do so and you'll find the rate you pay shoots up.

Barclaycard has positioned itself as a market leader by offering 17 months on balance transfers — the longest interest-free period on the market. If you registered now you wouldn't have to pay any interest until spring 2012 giving you plenty of time to pay off your debts.

Once the balance transfer period has elapsed, you'll revert to a 16.9% APR so it makes sense to clear your debts in the allotted time or else transfer them onto another card.

The card carries a 2.9% balance transfer fee but you will receive a £20 discount if you transfer more than £3,000 before 31 January.

MBNA also offers a competitive deal with 16 months on balance transfers for a 2.88% fee. After 16 months, the APR is 16.7%.

Virgin, Yorkshire and Clydesdale Banks match MBNA's 16-month deal, but carry slightly higher balance transfer fees.

If you are repaying multiple debts, you may be paying more interest than you need to and have the additional hassle of dealing with numerous creditors. Consolidating your debt with one loan could be a valuable solution.

Activity in the loans market in recent weeks has sparked a rate war as lenders have been dropping rates to attract borrowers struggling with debt.

At the end of last year Sainsbury's topped the best buy tables with the market leading rate of 7.4% APR.  However, Alliance & Leicester and Santander have since beat that with a 7.3% APR.

The rate applies to loans between £7,500 and £14,950 and is fixed over the lifetime of the loan with no arrangement fees.

Under current regulation, you can't borrow more than £25,000 as a personal loan. Needing to borrow a larger amount could signal serious debt problems and it might be prudent to seek professional advice.

Additionally, for smaller amounts it's wise to avoid personal loans. You might get a lower rate, but you are locked into repayments for periods generally between one and five years meaning you're going to be paying that rate of interest for the full period, possibly a number of years.

If you want to pay the money off early, you'll generally be hit with early repayment charges, meaning if you plan to pay the money off sooner, it can be worth paying more interest on a credit card (or potentially no interest with a balance transfer card) but repaying it in less time. Yahoo News