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Category: Debt

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.