Service Plus Credit Union

Consolidating Holiday Debt

Posted on March 2, 2023 at 8:55 PM by Service Plus

The holiday is a time for gifting and celebrations. It is easy to overspend during the holiday season—the gifts, the decor, the trips to see family, it's all too tempting. Shopping during the highest inflation rates has left many Americans in more debt than ever, with the average holiday debt load increasing by 24% from last year to nearly $1,550—the highest amount over the previous eight years.

With the holidays over and the credit card bills soaring, you might wonder if there is a way to improve the situation—debt consolidation with careful planning and effective budgeting can help streamline the repayment process.

Here's what you should know about debt consolidation and how it can benefit you.

 

What Is Holiday Debt Consolidation?

Holiday debt consolidation is a way to pay off holiday debt by consolidating your credit cards and getting one improved, lower-interest-rate card. It's a great way to eliminate your holiday debt faster and help you avoid late fees. It also helps simplify the repayment process and secure a better annual percentage rate (APR).

This method is most effective for credit card debt. In some cases, you can consolidate other types of unsecured debt, such as medical bills or personal loans, and in extremely rare cases, student loans.

 

Top Ways to Consolidate Your Debt

There are several approaches to debt relief, but each option is generally tailored to a specific situation. Gather all your bills, calculate how much you owe and your credit scores, and then look into debt consolidation options.

 

Debt Consolidation Loan

Debt consolidation loans are a type of personal loan. They can be beneficial if you qualify for a low-interest rate, enough funds to cover your debts, and a comfortable repayment term. You can use a debt consolidation loan to pay off all your holiday expenses at once. The interest you'll pay depends on the amount of money borrowed, and the time it will take you to repay the
loan.

 

Balance Transfer Credit Card

Credit card transfers can be a quick and easy option to consolidate your debt if you have a high credit score. It involves transferring multiple credit card balances to a single 0% interest or a low-interest credit card for an introductory period of up to 18 months. The best is to pay the entire balance before the promotional APR period ends, or you risk racking up even more interest than you started with.

 

Home Equity Loan

If you are a homeowner with enough home equity and a good credit history, you can borrow a part of the home equity at an affordable rate to consolidate your debts. Home equity loans give you money at a fixed rate with long repayment terms and low-interest rates and can be highly helpful for debt consolidation. However, it can lead to foreclosure of your home if the payments are not made on time.

 

Debt Management Plan

A debt management plan entails negotiating with creditors and creating a repayment plan with the help of a nonprofit credit counseling agency or a debt relief company. You close all your credit card accounts and make a monthly payment to the agency, which pays your creditors.

Paying off debt more quickly can be made possible by consolidating debt at a lower interest rate. Contact the Service Plus Credit Union to learn more about consolidating holiday debt. We are here to help you with all your financial needs. Schedule an appointment to learn more.

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