How to Handle Your Holiday Debt

The upcoming holiday season is when all of us spend a little outside our budget to get those presents for our friends and family. Then the bills start coming in January and the panic starts to set in. But don’t get overwhelmed! We’ve got three strategies to help you pay off that debt.

1. Refinance your Home

A few years ago the government made new rules about refinancing your home, but it is still possible. The maximum amount you can take out on your home is 80% of its value, 85% if you can find a special alternate lender. This option allows you to pay off as much as you want at a time, which can often result in substantial monthly savings. The disadvantages are that the debt is payable over a long period of time, therefore, there’s a higher cost overall to borrowing. Refinancing is also subject to legal fees and appraisal cost in order to set them up, and potentially a fee to break your current mortgage.

2. Consolidation

This involves taking out a loan that is large enough to pay all of your credit card debts. This results in you only having one payment per month at a lower rate than all of your credit cards. You can consolidate your loans through either a line of credit or a straight consolidation loan.

• Line of Credit

This option is available at all banks and credit unions. The funds are usually available right away and the minimum payment is commonly 1% of the balance. However, you will need to pay more than the minimum each month in order to pay it down.

• Consolidation Loan

This option has a fixed amount and a due date you must pay by a set date. If you are good at budgeting this won’t be a problem. This loan will also not allow you to re-advance the funds after you pay it down; very helpful when paying off debt!

3. Top Down

This is a good option when you are self-disciplined. You will need to figure out all the rates of your credit cards and determine which one is the highest. Start with the highest rate credit card and drop all the other payments to the minimum. This allows you to pay a larger amount to the highest rate credit card first, then you move on to the second highest rate card once the first is paid off. The process is simply to continue this strategy until you are debt free! If you choose this option, make sure you write down your new goals frequently and check on your balance regularly to see your progress.

Once you are debt free, visit your local bank to put some money into a savings account! This will help you next time you want to buy all those fabulous gifts.

If you have any questions or would like to discuss one of these options further, feel free to contact AC Lending Group!