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Author: Jason

I have spent my university years looking for the easiest way to pay off my student loan. While I have no professional financial education, I have spoken to many financial advisors and even entrepreneurs, and have learned a few great strategies that can be used to repay any type of debt, not just student or personal loans. After I graduated, I went on to interview as many successful young entrepreneurs as I could, fascinated by how some individuals handle their debt. Now, I want to share what I’ve learned. I've discovered that borrowing and repaying money can be easy and I want to show others how to do it.

What Is an Individual’s Credit Score and How Is It Calculated?

Regardless of what bank or credit card company an individual chooses to use, he will have to pass an evaluation process to gain access to their financial services. During this process, lenders look at his financial history and his credit file. They use the information extracted from these two sources, along with his credit score when deciding both the eligibility for various forms of financing as well as other details such as the borrowing limit and the interest rate that are attached to loans and credit cards.

Of these elements, the credit score is often the most mysterious, mostly because borrowers are usually unaware of what it is and how it is calculated. Furthermore, lenders do not usually disclose details related to their assessment process. Unfortunately, there is no simple way of explaining what a credit score is as its value is determined by multiple factors, each of which weighs differently, depending on the credit reference agency that calculates it.

This having been said, it is possible to look at what values go into calculating this number. Here is what you need to know:

What Is A Credit Rating?

An individual’s credit score is a figure that is calculated by looking at his long-term financial habits and status. These values are not calculated by lenders, but by specialised agencies that focus on keeping financial records on individuals throughout the country. These are called “credit reference agencies”, or CRAs.

There are currently 3 consumer CRAs that operate in the United Kingdom:

  • Equifax;
  • Experian;
  • TransUnion;

Each of these has a different formula that is used to calculate a consumer’s credit rating and none of them has disclosed it to the public.

Generally speaking, credit scores are used by a wide variety of lenders, including banks and some local credit unions. These values cannot be changed overnight and are based on an individual’s financial history. In other words, missing a monthly payment will not cause irreparable damage to your credit rating, but a lifetime of poorly managed debt may be extremely difficult to make up of.

How Are Credit Ratings Calculated?

While there is little clear information regarding what formulas CRAs use to calculate credit scores, analysts have disclosed that the following factors are important:

  • Credit Utilisation Ratio – An individual’s credit utilisation ratio plays a big part in calculating his credit score. This ratio shows how much money an individual borrows from what is available to him through his credit cards.
  • Available Credit – Having too much credit available to an individual will reduce his credit score. For example, having an unused line of credit or credit cards that have large limits. Generally speaking, lenders consider that his unused credit represents money that is stuck in the loan agreement and does not benefit the lender or the borrower.
  • Number of Loan Applications Submitted – Submitting a large number of loans in a short period will reduce an individual’s credit score. This includes situations where borrowers would submit applications to multiple lenders. Ideally, these should be evenly spaced out over a greater period of time.
  • Repayment Consistency – How a borrower repays his debt plays a big part in the value of his credit score. Keep in mind that this score is built over time, which means that missing a payment will not cause serious damage. However, missing or delaying payments every month will have a big impact on your credit score.
  • Utility Bills Payments – Almost all electricity and gas companies submit their financial data to CRAs, including the payment habits of their clients.
  • County Court Judgements – County Court Judgements are court orders registered against individuals who fail to repay their debts. These will have a serious impact on your credit score and it can take up to 6 years for their effects to disappear.

What Is the Difference between Refinancing and Consolidating Your Debt?

Managing one’s debt is not always an easy thing, especially when considering that unexpected expenses such as home repairs and medical treatments tend to pop up on regularly. While most individuals find ways to manage their income to repay their debt and also take care of the monthly expenses, this is not always possible.

Luckily, most banks, as well as a growing number of other private lenders have started to offer borrowers ways to manage their debt. There are currently only two ways to reduce the cost of one’s debt. Borrowers can refinance their loans, or they can get a debt consolidation loan. Both of these are equally useful when an individual cannot keep up with the monthly payments, however, they offer different advantages and disadvantages. In some cases, choosing one over the other can lead to more financial issues.

This having been said, let’s look at what each of these solutions is and who they are designed for

Loan Refinancing

Loan refinancing is the most often encountered debt management method. It enables borrowers to replace their current debt, with a new one that has different terms and conditions. Generally speaking, lenders only offer borrowers the ability to refinance only one loan at a time, and the terms tend to be mixed. In some cases, an individual will have to decide if he would rather have the monthly payments spread over a longer period, or if he prefers a more affordable interest rate.

It is also worth mentioning that refinancing is approved for individual loans. This means that if you have several loans, you will have to refinance each of them separately. Furthermore, most lenders are reluctant to allow borrowers to refinance more than one loan in a short period of time, making it important to prioritise the most expensive debt.

Refinancing can replace an existing loan with either a secured or unsecured one. This depends on the borrower’s relationship with the lender, however, in some cases; it can be a great way to turn a partially paid secured loan into an unsecured one.

Debt Consolidation Loans

Debt consolidation is somewhat similar to loan refinancing, with the exception that it works for almost all forms of debt. When an individual applies for a debt consolidation loan, he can borrow enough money to repay several other loans, as well as pay off his credit card debt and payday advances.

These loans have higher values than regular ones and are, almost always, secured against the borrower’s home. This, however, enables lenders to offer low interest rates and longer repayment terms. In most cases, a debt consolidation loan must be repaid in approx. 10 years, however, this detail varies depending on the borrower’s relationship with the lender, the amount of money that he needs and his credit score.

Deciding Which One Is Best for Your Needs

Deciding between them can be difficult, especially when considering that a debt consolidation loan is a long-term financial commitment, whereas a refinancing loan can take as little as one or two years to repay.

Furthermore, tends to be easier for individuals to refinance their loans because the process requires a lower credit score than what is needed to get a debt consolidation loan.

In the end, it all boils down to being able to predict how your financial life will be in the future. Debt consolidation loans are more advantageous if you have several types of debt that you need to manage, but repaying it can take up to 10 years.

This means that you have to be certain that you will be able to support this expense for the entire repayment term of the loan. Furthermore, it is unlikely that the lender will give you another debt consolidation loan until you have repaid the current one. On the other hand, refinancing a loan is much easier and can be done multiple times.

How to Reduce the Cost of Your Debt during the Holidays?


The winter holidays can be stressful for individuals that want to buy presents for their loved ones, but also have a large debt that they need to manage. Unfortunately, this pushes many people to take out additional loans only to find themselves that they have to repay an extremely large amount of money afterwards.

While there is no way to simply make the debt go away, there are a few methods that you can use to reduce the cost of your debt during the holidays and make it easier to buy presents and pay for creature comforts.

This having been said, keep in mind that each of the following methods may be used separately, however, implementing two or more of them in your debt-management strategy will ensure that you will be able to afford a wider variety of products and services. Here is what you need to know:

  • Refinance Your Most Expensive Loan before the Holidays Start

The best way to keep the cost of your debt under control is to take your most expensive loan and to refinance it. This will allow you to change a few important aspects of the original agreement. You may be offered a lower interest rate and some lenders even allow borrowers to spread their monthly payments across a large number of months. This will reduce the amount of money that you have to repay each month.

  • Get a Debt Consolidation Loan

If you have several types of debt that you need to repay, consider getting a debt consolidation loan. This will help you to reduce the overall cost of the debt and also increase your credit rating. Furthermore, keep in mind that once you get a debt consolidation loan, it will be easier to get additional financing.

The downside with this method is that the money may not be enough to cover all of your existing debt. However, it should be enough to repay at least the most expensive loans that you currently have.

  • Get a Personal Loan That Can Cover all Your Winter Holiday Expenses

This one is useful if you tend to borrow money to purchase presents for your loved ones. Most retailers give customers the option to pay for expensive products in instalments; however, this may leave you with several monthly payments and interest rates that you need to handle.

However, if you plan your expenses ahead of time and get a personal loan that will cover all of your purchases, you will only have to manage one monthly payment and one interest rate.

Try to get the loan before December as some lenders tend to increase their interest rates as a result of the increased demand for financing.

  • Avoid Using Credit Cards or Other Types of High-interest Loans

Credit cards, payday advances, and bank microloans are the most expensive types of debt, especially during the holidays. Avoiding using them will not only prevent your credit rating from going down but also make it easier to manage the debt that you may already have.

  • Set Aside Money for the December Monthly Payments in Advance

If December is particularly difficult on your finances, consider preparing your monthly payments ahead of time. This should be extremely easy if you put aside money in the months leading up to the winter holidays. However, this strategy requires discipline. Most individuals who save money for their December monthly payments end up using the money to pay for additional presents or creature comforts.

A good way to keep the money locked away is usually to deposit it into a separate bank account that you will only access once you need to make the repayments.

5 Strategies to Keep Your Debt under Control during the Winter Holidays


For most people, the winter holidays are the most expensive of all. The whole month of December is filled with expenses that most individuals will not encounter during the rest of the year. From buying gifts and decorations to paying for winter creature comforts and holidays, the end of the year can be extremely expensive.

There are usually two methods that individuals use to ensure that they can afford everything that they need. Many start saving money a few months before the winter holidays, to have a larger budget for gifts. Others, resort to borrowing money from banks and various private lenders.

Unfortunately, almost all lenders capitalise on people’s need to borrow money during the holidays and market their products more aggressively, regardless of how expensive the debt may be. Borrowers get the loans, use the money to pay for expensive gifts and start repaying their debt once December ends. While this is not an issue in itself, it can cause problems for individuals who already have one or more loans that they need to repay. In the end, all the expenses can pile up and be very difficult to manage.

This having been said, there is a better way to manage your existing debt during the winter holidays and also to borrow money for presents without having to pay for expensive loans. Here is what you need to know:

  • Consolidate Your Debt before November Starts

If you have multiple types of debt that you are trying to repay, getting a debt consolidation loan will be the best course of action. This will not only reduce the overall cost of the debt but also make it easier to repay the money.

However, the process of applying and getting one of these loans is not as fast as that associated with a personal loan. You will have to apply for the debt consolidation loan before the start of November if you want to benefit from the lower debt cost during December. The main reason for this is the fact that a debt consolidation loan needs to be secured against the borrower’s property, usually his home. This can only be done if the property is evaluated, which can take up to 2 weeks, depending on its size and the availability of the specialist.

  • Pay off Your Credit Cards before the Winter Holidays

Credit card debt is often the most expensive type of debt that an individual might have. Keep in mind that once December starts, you may need to use the cards to purchase gifts, which means that you should first pay them off and start the month with a clean slate. If not, the debt will grow increasingly larger and more difficult to manage.

  • Get a Personal Loan and Use It for Gifts

Avoid buying to many products that you have to pay for in instalments. While it may seem like a good idea at first, it will only put pressure on your personal finances and lower your credit rating. Instead, consider making a list of all the items that you need to buy and then getting a personal loan that can cover the entire expense. This will leave you with a single monthly payment that you need to worry about and a single interest rate.

  • Don’t Pre-order Products and Wait for the Christmas Sales

Many electronics manufacturers allow individuals to pre-order phones, tablets, laptops, game consoles and games. Many websites also offer discounts for those who pre-order products and pay for them using their credit cards. There are two issues with this practice. First of all, the pre-order price is usually greater than the release price. Secondly, the credit card debt will be difficult to manage if you cannot repay it before the month ends.

  • Use Online Lending Services

If you only need small amounts of money, from time to time, consider using an online service to borrow it. Several platforms enable individuals to get micro-loans that come with low interest rates and can easily be repaid the next month.

The Best Ways to Borrow Money for Gifts


The winter holidays are, for most individuals, the best part of the season. However, they can also be extremely stressful, especially on a financial level. Most retailers compete in terms of discounts and product offers, in an attempt to convince customers to make more expensive purchases.

While most of the deals offered during the winter holidays are worth taking into consideration, some items may still be out of the reach of customers. A commonly used solution to this issue is to borrow money. The downside with this is that it is easy to borrow more than one can repay and end up with a considerable amount of debt once December passes. This having been said, here are the best ways to borrow money for gifts. Please keep in mind that these have been chosen to make the debt as easy to manage as possible:

  • Get an Unsecured Personal Loan

Getting a loan from a bank is, in many ways, the most accessible to borrow money. Personal loans do not come with any restrictions in terms of what the borrower can do with the money and have a relatively low interest rate. Furthermore, it can be a great alternative to instalment purchases. Most individuals tend to get multiple expensive products such as laptops and game consoles and pay for each of them in instalments. 

This type of debt is not only difficult to manage; it can also be extremely expensive when compared to what an individual would pay for a single personal loan. However, it is important to make sure that you take out a single personal loan, that it is unsecured, and that it has a high enough value to cover all of the gift purchases.

Finance analysis concept using finance report with pen and calculator
  • Use a P2P Platform to Borrow Smaller Amounts of Money

Overusing bank products and services in a short amount of time may reduce your credit rating, which makes it important to look for alternative lenders, preferably ones that do not report their activity to any of the main credit reference agencies in the country.

P2P lending platforms are great alternatives to banks. Using them will not lower your credit rating, they do not perform a credit score check in order to decide who is eligible or not, and getting an online loan usually takes under 72 hours.

  • Use Online Lending Services for Microloans

Tens of websites offer users the possibility to get microloans. The terms and conditions for these are similar to payday advances and it usually takes under 24 hours to get one, making them great for most gifts. 

  • Replace Your Credit Cards with Smartphone Lending Apps

Using your credit card too often is a sure way to reduce your credit rating and to end up with an expensive debt that needs to be repaid before the month ends. Luckily, there is an alternative to credit cards, in the form of lending apps. These allow individuals to pay for products using NFC-enabled smartphones and the money can be set to be automatically repaid after a certain period.

Again, using these apps does not affect your credit file and the requirements to borrow money are simple. Users will only need to submit proof of address, proof of identity, proof of income, and a bank account statement.

Regardless of what method you intend to use, keep in mind that most lenders come up with great offers during the first weeks of December. If you want to borrow money and use it during the winter holidays, do not submit loan applications until after these new deals have been advertised.