Credit cards are now competing with personal loans in the debt consolidation market, according to retail financial services researcher Canstar Cannex.
The analysis is contained in the company’s star ratings covering personal loans in which it said that while car purchases used to be the most popular reason people took out a personal loan, it was a sign of the times that this purpose had been overtaken by debt consolidation.
However, it said consumers were increasingly finding credit cards a convenient vehicle for debt consolidation, largely because providers were offering balance transfers ranging from 0 per cent for six months to 4.99 per cent for the life of the outstanding balance.
The Canstar Cannex analysis warned, however, that self-discipline was the key for consumers irrespective of which option they chose.
However, it said that with respect to credit cards, unless consumers could remain disciplined with respect to credit cards, they would be better served in paying down their debt by way of a personal loan.
“It may be slow and steady but if you can’t trust yourself with a credit card, a personal loan will get you over the debt finishing line a lot sooner,” the analysis said.