How to Consolidate Your Holiday DebtBy Caitlin in Debt
Life is the thing that happens while you’re busy making plans. That’s how the old saying goes, and it is true when it comes to debt as well. While you were enjoying the delectable foods, amazing scents, cool parties, and that fabulous feeling that comes with giving your loved ones exactly what they wanted for Christmas, the holiday season also probably came with a hefty price tag. Many people go into debt during the holidays. If the enlightenment of the new year has made you aware of your own mounting debt, don’t worry! You can consolidate that debt and resolve your problem.
Prioritize Your Payments
Try not to panic when you look at your pile of credit card bills. Keep your cool. Take a deep breath and realize that debt is a problem that’s fixable. In order to avoid any long-term damage to your credit report, though, it’s important to make monthly payments on each and every bill that you have. Before you even think about trying to start paying off certain cards entirely, make sure that it’s sustainable for you to meet your minimum monthly payments no matter what. Now that you are on time and in good standing on your current debts, the next step is to start the consolidation process.
Pros and Cons of a Balance Transfer Option
You should look at the option of transferring the balances from your credit cards that have a high interest rate to credit cards with a lower interest rate. You may be able to open a brand new credit card just for this purpose. It’s the interest on your credit card balance that can ultimately keep you in debt for a long time and ultimately cost far more than the items you originally bought. If it’s possible to get a balance transferred to a card with a far lower interest rate, go for it!
When it comes to applying for a new credit card to use for the balance transfer, though, choose your bank carefully. Every time that you apply for a new credit card, that inquiry and application shows up on your credit report. Start with the bank that has the most desirable interest rate for you.
Also, when weighing whether it is worth your time and effort to do a balance transfer, don’t forget that there is typically a fee that comes along with the balance transfer process, and make sure that doesn’t negate your efforts. It usually doesn’t, but you need to be fully aware of what’s best for you.
There’s yet another thing that you must consider! Look at whether the lower interest rate that makes the balance transfer such a tempting choice for debt consolidation is simply a promotional offer. If it’s only a promotional offer, the interest rate beyond the promotional period may be higher than your original card had. So check to make sure that the lower interest rate is something you can enjoy for years, not just a six-month promotional period.
Is a Personal Loan Worth It?
One promising solution for consolidating your holiday debt is to take out a personal loan that can help you pay off many of your debts at once. Look for a loan with a significantly lower interest rate than your credit cards hold. You will need to take the money that you are given from the loan to immediately pay on your debts, then you will only have to deal with paying one note each month instead of the multiple credit card bills.
Store those old cards out of sight for a while, and focus on paying the personal loan regularly to reap the rewards of this debt consolidation option.
Whatever you do, don’t make the mistake that is so common among those who have gotten in debt after developing some bad financial habits. Once you consolidate your debts with a personal loan, don’t go right out and charge up those cards that were relieved of the debt with the consolidation loan. If you do that, you’ll only end up in worse financial shape than you were before you acquired the personal loan. That can ultimately lead to dire financial consequences.
Using Your Home Equity to Erase Debt
There is a very good solution that can help you get out of your frustrating holiday debt easier than you might think. Use the power of your property value to make it easier to pay off your debt with what may be an ultimately lower interest rate. Take out a home equity line of credit, a type of loan that uses the equity that you have in your home as collateral. Just make sure that you are aware that the interest rate on most home equity lines of credit are not fixed, so it may go up over time.