In our country, many people take out loans during the holidays for buying gifts, traveling expenses, and other holiday-related expenses.
According to a 2019 report by MagnifyMoney, the people in our country racked up almost $1,325 in holiday debt.
Eventually, they find it hard to repay their debts once they resume their normal lives after celebrating the holiday season. The most common debts incurred during the holidays are credit cards and payday loans; because both of them are unsecured loans and easy to opt for. The eligibility criteria for taking out a payday loan is not stringent enough as it offers quick loans that too without a credit check! And the people having a credit card might feel like swiping it for making every holiday-related purchase.
By the way, have you opted for loans during the holidays? If so, you should try to pay them off at the earliest possible. Otherwise, your holiday debt hangover will keep rolling forward. Eventually, it will affect your financial life adversely.
So, here are some of the best possible tips to repay your payday loan and credit card debt incurred during the holidays.
1. Create a budget for the New Year
The more funds you can dedicate to your debt repayment, the faster you can get rid of your debts. The easiest way to accumulate more funds for your holiday debt repayment is by creating a realistic budget and sticking to it without any fail at least for the first half of the New Year.
So, if you are following a budget, you need to relook at it and find ways for stretching it as much as possible. However, if you don’t have a budget, you should chalk out a budget that aims at your necessities only.
Calculate your income from all sources and list your basic expenses along with the monthly debt payments that you need to make. Then chalk out a spending plan that can help you to save more by cutting your discretionary expenses. If you are tech-savvy, you can take the help of online budgeting apps like Expensify, Mint, etc. to track your expenses and save more money for repaying debts.
2. Opt for a balance transfer card
If you are trapped with multiple credit card debts, you can opt for the balance transfer method. Usually, the balance transfer card comes with a 0% APR (Annual Percentage Rate) for an introductory period of about 18 to 24 months.
So, you can transfer your high-interest credit card debts to the new card. Thereby, you will be able to repay your debts with ease as you will have to manage a single debt unlike before. Besides, you can save money on your interest payments too as you won’t have to pay any interest during the introductory period. So, I would recommend you paying off the outstanding amount in your balance transfer card within the introductory period to make the most of it.
Remember, you need to have a good credit score of around 700 and above to qualify for taking out a balance transfer card. Also, make sure to read the terms and conditions of the balance transfer card carefully, like the balance transfer fee and the post-introductory period APR.
3. Take out a personal loan
Well, you can take out a personal loan to consolidate your credit cards and/or payday loan debts. That’s why when a personal loan is used for consolidating debts, it’s termed as a consolidation loan as well.
A recent Bankrate study has revealed that the reason for taking out personal loans, for most of the applicants, is debt consolidation.
Usually, personal loans have lesser APRs than credit cards and payday loans. You will need to have a credit score of around 580 to 600 to qualify for taking out a personal loan.
So, if you take out a consolidation loan, you can bundle your multiple debt payments into one every month. Besides, you will have to shell out much less for making interest payments. So, you can repay your debt faster as well.
However, you need to keep in mind that you may have to pay an origination fee of around 1% to 8% of the loan amount.
4. Opt for payday loan debt consolidation program
Payday lenders target the people who need fast cash and don’t have adequate credit scores to look for other options. They take advantage of the situation and levy incessantly high-interest rates.
Many people fail to repay their payday loans (pdls) on time and ultimately fall prey to the debt trap by renewing their loans. A Consumer Financial Protection Bureau (CFPB) study has found that four out of five payday loans are rolled over or renewed.
So, if you are worried about the incessantly high-interest rates of your pdls, you can opt for the payday loan debt consolidation by consulting a genuine debt relief company. The biggest advantage is, unlike a personal loan, you won’t need any credit score to qualify for the payday loan debt consolidation.
The financial coaches of the debt relief company can negotiate with your creditors to reduce the high-interest rates. Once they agree, you can bundle your monthly payments into a single one, and that too with a lower interest rate.
So, by opting for the payday loan debt consolidation, you can repay your pdls with ease and save money on interest payments too.
However, if you can’t afford the monthly payments with reduced interest rates, you can opt for the payday loan debt settlement by talking to your debt relief company.
The bottom line is if you have racked up holiday debt, no need to panic. Hopefully, the smart suggestions to repay debts that we discussed above would help you to pay off your payday loans and credit card debts incurred during the holidays. And you will be able to lead a debt-free life ahead and focus on your financial well-being.
Lastly, I would like to suggest you manage your finances so that you don’t need to rely on loans, especially to celebrate the holidays. Remember, holidays are meant to relieve stress and enjoy quality time with your close ones; not to rack up debt and suffer from holiday debt hangover!
What do you think?