
Paying Off Holiday Loans
Now that the holidays are over, many Americans are winding down from the celebrations and family time that come this time of year. The extra shopping, eating and travel are fun, but can take a toll on your finances. It’s now time to get back on track. From credit card bills to paying off your holiday loans, use these tips to get out of debt as soon as possible.

- If you used a holiday loan to cover expenses, find out when your first payment is due.
- You will need to pay off your holiday debt on top of your other bills and expenses. Focusing on getting rid of high-interest credit cards and loans can help you save money on interest payments in the long-run.
- Consider consolidating your debt if you can find a lower interest rate and to help you manage your debt repayment strategies.
LESSON CONTENTS
Repaying Your Holiday Loans
If you used a holiday loan to cover additional expenses in December, you need to prepare for your first payment. Holiday loans come with a fixed annual percentage rate (APR) with a set repayment period, usually 12 months or more, which means your payment due will be the same amount each month. Research the terms and conditions of the loan to find out when your first payment is due.
The total amount of the loan is divided by the number of months in the repayment plan plus interest. For example, if you borrowed $5,000 in holiday loans and the loan extends for 60 months with a 10% interest rate, your monthly payment would be:
$5,000/60 = $83.33 x 1.10 = $91.67
The loan may come with other fees, so look at your monthly statement for more information. Be sure to pay your monthly bill on time to avoid late fees and falling behind on payments. You can lower your monthly payment by extending the repayment plan; however, you will have to pay more in interest over the life of the loan. If you can afford to pay more than the minimum amount, put more money towards the loan’s principal to help get out of debt more quickly.
Tips for Managing Holiday Debt:
You will need to manage your holiday debt on top of your other monthly expenses, including necessities like housing and food as well as your existing debts. Consider the following when managing your expenses:
Pay Off the Highest Interest Debt First
If you have multiple credit cards or loans to pay, use the avalanche method to get rid of the loan with the highest interest rate first to save the most money. The avalanche method means making the minimum monthly payment on all your loans and cards. You can then put all your extra money towards the loan with the highest interest rate until you pay it off entirely. Once that debt is repaid, put the extra money towards the loan with the next highest interest rate until that is repaid, and so on until you are debt free.
Transfer Your Balance to a New Card
You can also apply for what’s known as a balance transfer credit card. This type of card will transfer all your outstanding credit card debts to a new credit card. You set-up a balance transfer card at your current bank, credit union or another lender. These cards usually come with an introductory period with zero interest. However, there may be a balance transfer fee, which can be between 2% and 3% of the amount being transferred. For example, if you are transferring $20,000 in debt and the balance transfer fee was 2%, you’d need to pay $400.
These kinds of cards only make sense if you plan on paying off most of the principal amount during the intro period; otherwise, the full interest rate will set in. Most importantly, if you increased your spending over the holidays, make sure you reign in your current expenses and put more money towards getting out of debt.
Consolidate Debt with a Personal Loan
If you are trying to pay off more than one loan or credit card at once, consider consolidating your debt by applying for a personal loan for the total amount of your combined debts. If you qualify for the loan, you can pay off your other debts and consolidate with the personal loan, so you only have to make one monthly payment. Taking out a personal loan can help you save money if you are in good standing as a borrower. The lender will do a credit check and provide an interest rate based on your credit score and debt-to-income ratio.
You don’t have to consolidate all of your debts into a personal loan, especially those with low interest rates. For example, your student loan or mortgage may have a low interest rate, so consolidating them wouldn’t make sense. Consolidate debts with interest rates that are higher than the consolidation loan to help pay them off faster.
Now that the holidays are over, it’s time to start the new year by getting your finances in order with these holiday debt tips.
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