Many Americans accumulated credit card debt throughout the holiday season. Fortunately, there are numerous options for paying it off. unidentified/Getty Images
The holiday season is a costly time for many. According to a recent survey, the average American accumulated roughly $1,550 in debt during the most recent holiday season.
This is the largest Christmas debt load in at least eight years, up 24% over last year.
If you are one of the many who have accrued debt to make the holiday season more enjoyable, there are ways to address it.
How to reduce holiday debt
Here are four strategies for addressing holiday debt (and, many times, even reducing what it costs you).
1. Get a debt consolidation loan
Debt consolidation loans are a form of personal loan used to repay existing obligations. It may seem contradictory, but because these loans typically have significantly lower interest rates than credit cards, this method can typically save you a substantial amount of interest over the long term.
Here’s one instance: Consider that you have $4,000 on a credit card with an 18% interest rate. If you obtain a debt consolidation loan with a 9% interest rate and utilize the funds to pay off your credit cards, you have effectively halved your interest rate. Depending on how quickly you repay the loan, you might save hundreds of dollars in interest over time.
To see exactly how much a debt consolidation loan would save you, you can get a free savings estimate online right now.
2. Borrow against the value of your home
Borrowing against your home equity can be a low-cost way to manage debt if you are a homeowner. In the long term, these loans typically offer significantly lower interest rates than credit cards (and even personal loans), allowing you to save even more money.
There are also numerous options. There are cash-out refinances, which include replacing your existing mortgage with a larger one and receiving the difference in cash. You may simply explore your cash-out refinance choices on this page to determine your eligibility.
And there is the reverse mortgage for elderly. The lender pays you from the equity in your property, rather than you making payments to the lender.
You can also obtain a home equity loan, which provides you with a lump-sum payment to apply to your bills, or you can choose a home equity line of credit (HELOC). These operate similarly to credit cards and allow you to withdraw only the funds you require.
3. Withdraw from your life insurance policy
If you have a life insurance policy, you may also be able to withdraw funds from it. Permanent life insurance policies, such as whole life insurance and universal life insurance, are required for this. Term life insurance products do not offer the chance to withdraw funds.
If you decide to withdraw money from your policy, keep in mind that it would diminish its value and the death benefit your loved ones would receive.
To understand more, obtain a free life insurance estimate online immediately.
Obtain a credit card that facilitates balance transfers.
Balance transfer credit cards can also be utilized. Typically, these credit cards have promotional interest rates (often 0%) for a limited time. Once you have one, you may transfer your various credit card balances to it and enjoy interest-free payments for one to two years.
Just be sure to pay off the bill before the promotional rate expires, as it may increase significantly after it does. Additionally, you should be aware of any transfer fees the card may incur. These fees might sometimes exceed 5 percent of the transferred balance.
There are numerous ways to escape debt.
There are choices available for those who picked up holiday credit card debt. In addition to the techniques listed above, credit counseling services might also be of assistance. You can also contact a financial expert for individualized debt assistance and budgeting advice.
Today, get a free savings estimate online to determine if debt consolidation is right for you.
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