Choose the possibility of 12 months less of repayments and hundreds of pounds less interest.

When considering the option of transferring a credit card balance onto another credit card to take advantage of a 0% offer or taking out a loan to consolidate the credit card debt it pays to sit down and do the maths.

Using a variety of online calculators and some simple maths it is possible to determine which option would make the most financial sense.

Taking the time out to sit down and tackle the calculations could save over £1000 so even if it takes an hour or two it’s still well worth the effort.

Based on a figure of £5000 with a balance transfer offer of 0% APR for 12 months paying the minimum amount each month (based on 2.25%) and without payment protection insurance a balance of approximately £3805.16 will be left after the initial 12 month period.

The last interest free minimum repayment amount would be approximately £87.59 and if the remaining balance is paid off by this amount each month and not just the minimum amount anymore, the balance could be repaid in under 7 years. The remaining balance is subject to the standard typical APR and for this example a rate of 16.9% has been used.

By continuing to only pay the minimum amount after the introductory balance transfer period, using an online calculator provided by First Direct (www.firstdirect.com), the total time to repay the balance completely is over 20 years. With payment protection insurance this time increases even further.

But, by paying off the same amount each month as the last interest free repayment amount the time can be reduced by almost 70% and save hundreds of pounds in interest.

The total amount repaid, if the balance is paid off in under 7 years at the rate of £87.59 per month, will equate to approximately £7143.11 with total interest paid of £2143.11.

Compare this to a loan from Northern Rock with a current typical APR of 6.4% for loans of £5,000 and above and over a 6 year period without payment protection the monthly amount is £83.43, the total repaid is £6006.96, total interest repaid £1006.96. (source www.northernrock.co.uk and correct as at 06/03/2007).

The total interest paid with the credit card example is £2143.11 whereas with the Northern Rock Loan it is only £1006.96 representing a saving of £1136.15 and 12 months worth of worrying over repayments.

Even if unable to qualify for the best rates available from the leading lenders, a loan at 7.9% APR over 6 years gives the total amount of interest repaid as £1246.72 which still represents a saving of £896.39.

One consideration regarding a credit card however is the flexibility. If after having repaid a reasonable amount of the balance an emergency purchase is required the funds are immediately available.

Payment protection is not taken into account in the above calculations and can make a considerable difference to the total amounts repaid for both credit cards and loans.