Best ways to deal with Christmas debt


January 2014

Best ways to deal with Christmas debt

There are a number of merits to Christmas, namely the low prices, high spirits and celebratory atmosphere that comes with it each and every year. However, it is undeniable that it is also a period where our propensity for indulgence is exploited, and this can often lead to our finances severely tightening up in the winter months following 30 days of impulsive overspending.
The reality of this situation last year meant that so what are the best ways of retaking control of your financial situation and getting you back on track? Here are some financial tips that are worth considering if you overspent this Christmas that could help alleviate any stress or problems that are mounting on you as the festive season draws to a close.  
Transfer your debt to a 0% balance transfer card
The winter usually signals the beginning of the 0% balance transfer season, and this year many banks have gone to the next level with their offerings to attract customers. 0% balance transfer cards enable you to transfer credit card or current account debt to them and then pay zero interest on this balance until the introductory period comes to an end. Almost all charge a one off fee for transferring the debt which is usually around 2 to 3% of the amount. 
0% balance transfer cards could be particularly useful for transferring all of your Christmas debt onto, as you could then deal with it in smaller payments which are likely better suited to your finances. Barclays have just released a 30 month card that charges less than 3% on balance transfers, whilst Tesco and Santander also have 29 and 28 month cards that could help you space out your Christmas spending over an extended period of time, without having to worry about interest spiralling the total out of control.
It is important to remember though that once the introductory period is over with these cards that you will be moved onto a fairly high APR rate of around 19%, so you should ensure that you clear the balance before the deal expires or else risk a large sum of debt some way along the line. 
Check out your local Credit Union
A large reason for the high levels of Payday Loan usage in the UK is that people are not aware that there are alternate forms of short term finance outside of banks. One such faction is credit unionís that offer loans to members of its governing community at far lower interest rates than their payday counterparts. Credit Union are community run financial organisations whose members are all connected through some common factor, whether itís in employment, living area or social group.
Credit Unions typically offer loans anywhere between 25 and 50%, which is far superior to a payday loan. This also means that you can pay the loan back over a longer period of time, so that you can clear your Christmas debt and then move closer to being out of debt by utilising the services of a Credit Union. It is worth looking up your local union if you are looking for some form of short term finance because it is far better to be in debt to members of your own community than a Payday loan company looking to maximise its return from you. 
Avoid Payday Loans at all costs
Back in November last year it was reported that almost one million people were either going to or were thinking about taking out a payday loan to finance their Christmas. Considering the multitude of short term finance options available to them, this should have been avoided back then, and it most certainly should be now if you overspent this Christmas.

The interest rates attached to payday loans are huge, with most ranging from 1900% APR to 5000%. This means that if you were to acquire one to deal with your overspending problems from December, then you would simply be sweeping your problems under the cover for 1 month before being faced with an even larger sum to pay back in February.

Furthermore, your credit rating will take a hit from just making the application, and your ability to acquire a mortgage in the future will be comprised through the record of the application on your credit file. Due to this, it is important to avoid payday loans at all costs, if you really need short term finance and cannot get bank backing then find your local credit union. 
But if you have genuine aspirations for financial stability in 2014 then a payday loan should be avoided at all costs because the damage can be extremely hard hitting and long lasting if you do not have the finances to pay it back immediately. 
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