January 23, 2015

Getting over Holiday Debt

If you rang up a lot of holiday debt, you could be suffering from a holiday debt hangover. For those who were already struggling with persistent phone calls by bill collectors, the solution isn’t to transfer the money you owe on one credit card to another card. Instead, it’s time to consider debt consolidation. According to a piece by Bankrate.com, yuletide credit card debt is often downright depressing.

Before doing a credit card balance transfer, consider the fact that you’ll have to pay a balance transfer fee. If you can’t pay off the debt during the introductory interest rate or “teaser” period and you already have unpaid debts and late fees, a credit counselor can help you get organized. A trained and certified debt counselor will recommend you consolidate your debt in many circumstances.

You Stop the Spending Habit

If you are a spender, debt consolidation can interrupt your pattern. By agreeing to a Debt Management Plan, you are committing to a new habit of living below your means. Your new financial habits include budgeting for all of your expenses each month including a monthly debt repayment. If you just transfer the money you owe on one card to one with zero-percent interest, you won’t stop the habit of buying on credit.

You Satisfy Your Creditors

Many people can’t qualify for credit card balance transfers at zero percent interest rates. Most low-interest rate deals are for people with credit scores that are 700 or above. By talking to a credit counselor, you can learn how to improve your credit score so you will be eligible for low-interest credit cards in the future. In the meantime, a debt consolidation plan can satisfy your creditors. You’ll get to experience what it’s like to owe money at a lower interest rate as your credit counselors negotiate with your creditors. In many cases, creditors will forgive late fees.

You Have Hope Instead of Guilt

Many people feel guilty after going on a spending spree, even if they bought holiday gifts for others. When you agree to a Debt Management Plan, you release any feelings of guilt associated with bankruptcy and debt settlement. In the case of debt consolidation, you actually do pay back what you owe but you do it in less time. It’s also nice to know that you won’t start paying a low-interest rate only to switch to a 20 percent interest rate after 6 months or a year. When you transfer credit card balances, your annual percentage rate after the teaser period might shock you. With debt consolidation, you know exactly when you’ll be debt free. Having a payment plan with a final payment gives you hope.

Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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