Guest Post by Good Nelly
Holidays are meant for celebrations and spending quality time with your close ones. But many people fail to keep a tab on their expenses while spending on buying gifts, traveling, or other holiday-related costs. And eventually, they fall prey to the holiday debt trap.
One of the easy ways to rack up holiday debt is credit cards. You might feel like swiping your credit cards for almost every purchase during the holiday season. By doing so, you may accumulate an incessantly high outstanding balance amount that can be hardly affordable to repay.
A 2019 report by MagnifyMoney reveals that the people in our country racked up almost $1,325 in the holidays. So, it can take some years to repay the holiday debt if not taken care of properly.
That’s why we have listed some of the best possible tips that can help you to repay holiday debt with ease.
Review your financial situation
The baby steps to repay your holiday debt is assessing your financial situation and evaluating the debts. For that, you will have to relook at your budget and try to find out the categories where you can cut costs as much as possible. For example, you can find some easy ways to save money on groceries and boost your monthly savings.
By doing so, you will be able to save more and you can dedicate those funds to make extra payments for your debts. Eventually, it will help you to repay your holiday debts faster.
Besides, list all your debts along with their outstanding balance amounts, due dates, and interest rates. Thereby, it will help you to understand which debt you should prioritize first for repayment.
Chalk out a repayment strategy
Well, after evaluating your debts, you can get rid of your holiday debts by opting for one of the debt repayment strategies, like:
Debt snowball method
In this method, you will have to start paying off the debt with the lowest outstanding balance amount. Once you pay it off, you will have to target the debt with the second smallest outstanding balance amount and so on. But remember, you will have to make minimum payments for other debts too.
The snowball method can help you to keep your morale high during your debt repayment journey. Because when you try to pay off the debt with the smallest outstanding balance amount, it’s likely going to take much less time to eliminate it. And you will get the first taste of the victory of becoming a debt-free person.
However, you might end up spending more money on interest payments as you are paying off debts in the order of outstanding balances.
Debt avalanche method
In this method, you will have to target the debt with the highest interest rate. Once you repay that debt, you will have to shift to the debt with the second-highest interest rate and so on. At the same time, you will have to continue making minimum payments for your other debts as well.
The avalanche method can help you to save money on interest payments as you are focusing on the debt with the highest interest rate first. So, it can help you to repay your holiday debts faster too.
However, repaying the debt with the highest interest rate can take a longer time. So, you might feel hard to stay motivated during your debt repayment journey.
Opt for the balance transfer method
You can opt for the balance transfer method to repay your holiday debts with ease. For that, you will have to take out a balance transfer card at a lower APR (Annual percentage rate) than that of your existing debts. And you can transfer your existing high-interest debts to this new card.
By doing so, you will have to make a single payment every month instead of multiple payments. And you can save money on interest payments too as the new card is likely going to have a lower interest rate.
Usually, you need to have a good credit score to take out a balance transfer card, especially with a 0% interest rate. The credit card companies offer balance transfer cards for a 0% APR for an introductory period ranging from about 18 to 24 months. After that, they will levy a variable interest rate.
For example, the Citi Simplicity Card requires a credit score of around 700 to 749 and offers an introductory period of 18 months. After that, they will levy a variable APR of 14.74% to 24.74%.
So, I would suggest you repay the outstanding balance amount of the balance transfer card within the introductory period. Thereby, you will be able to make the most of the balance transfer method and get rid of your holiday debts with ease.
However, if you are not having an adequate credit score, you can use the Experian boost to increase your credit score.
Get professional help
Are you trapped with multiple unsecured debts? If so, you might be looking for ways to get rid of them at the earliest. But nothing might be working fine for you.
In that situation, you can get professional help and opt for the debt consolidation program by working with a reputable debt relief company. The debt consultants of the company will work on how to consolidate your debts by assessing your debts along with your financial situation. And based on that, they will suggest a monthly repayment plan that you can afford to pay.
At the same time, they will try to negotiate with your creditors to reduce the high-interest rates and waive off the late fees. Once they agree, you can start making single monthly payments to the debt relief company. And in turn, they will distribute the money among your creditors based on your debt amounts.
So, by opting for the debt consolidation program, you can repay your holiday debts without any hassles. And you can save money on your interest payments too. However, you will have to pay a fee to the debt relief company for their professional services.
The bottom line is, repaying holiday debt is not a difficult task. You need to follow some effective ways to get rid of your holiday debt. And hopefully, the 4 ways that we discussed above will help you to repay your holiday debt without any hassles.
Lastly, I would like to suggest you organize your finances in such a way that you won’t have to rely on loans for holiday-related expenses. Thereby, you can avoid a holiday debt hangover and enjoy the New Year.
Guest Post Author
Good Nelly is a financial writer who lives in Milwaukee, Wisconsin. She has started her financial journey long back. Good Nelly has been associated with Debt Consolidation Care for a long time. Through her writings, she has helped people overcome their debt problems and has solved personal finance-related queries. She has also written for some other websites and blogs.