That first credit card bill following the holidays can be an eye-opener. After buying gifts for your family and friends, reality sets in once you see how much you owe.
Struggling to pay off that debt? Don't fret too much - here's how you can financially recover before spring:
Think about consolidating
Depending on the size of your debt and how many credit cards you have, you may want to consider consolidating.
One way to do this is to open a new credit card with a lower interest rate. You can then transfer a large balance from an old card onto the new one so you can pay it off without worrying about interest. It may sound counterproductive to open a new credit card while you're in debt, but having a lower interest rate is more helpful than you might think.
You should also look into taking out a personal loan from Landmark Bank. Use a personal loan to pay off all your credit card debt at once, and then you can focus on paying back the loan. Instead of worrying about multiple monthly payments and interest rates, you'll only have one - the loan's.
Personal loans from Landmark come with competitive rates and flexible terms so you can pay off debt without being held back financially.
Create a repayment plan
If you don't want to open a new credit card or take out a loan, then you'll need to create an aggressive repayment plan.
Paying off your debt quickly is important because letting it linger will build up interest. And with interest rates rising because of the Federal Reserve, your debt can become more expensive.
Crafting an aggressive repayment plan starts with compiling a list of your credit card debt. You need to focus your attention on the cards with the highest interest rates first, then work your way down. This is known as the avalanche method, according to NerdWallet. Follow this plan and you'll save money while paying off your debts.
But the avalanche may not always work for everyone because it may take some time to eliminate balances. When you need to experience victories, employ the snowball method.
When you follow the snowball repayment plan, you eliminate the smallest debts first, no matter their interest rates. By witnessing these small victories, you're more likely to keep up the aggressive plan toward eliminating all of your holiday debt.
You really can't go wrong with either repayment method.
Dip into savings
Your savings account has a purpose: to provide you with cash when it's needed. Dip into your savings account if you want to eliminate lingering debt before it spirals out of control. Consider this financial move when you want to eliminate debt quickly and efficiently.
However, this approach should be met with caution. You don't want to deplete your savings account, only to then experience an emergency where you need more money than what's in your checking account.
If you'll be withdrawing from a savings account, be sure to replenish it. Remember, you should ideally have three to six months worth of expenses set aside.
Take action now
You need to eliminate holiday debt sooner rather than later. Develop a plan of action now so you don't end up paying more money in interest or letting it build up to an unsustainable level. Consider borrowing from your savings account, taking out a personal loan or developing an aggressive repayment plan.
Once that holiday debt is eliminated, you'll feel relieved.
For more information about smart ways to manage your finances, contact Landmark Bank.
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