They are becoming debt-free before Christmas is one of the topmost priorities of many UK citizens. According to sources, financial debt has grown £45 billion in the financial market over the past decade.
The financial debt only incorporates personal loans and credit cards. During the festive period, many households fail to meet financial commitments due to the high expenses incurred during it. Half of these people land in much more financial debts post Christmas.
Additionally, twenty per cent of these people become worried about their incapacity to complete the grown repayments. The data belongs to the YouGov report of 2019. On average, a person spends £1100 during Christmas with £400 on gifts alone.
However, it is easy to become debt-free before Christmas with five easy steps. These include figuring out the debt, consolidation, switching to credit cards, saving money, and opting better deals.
5 Steps to Stay Debt-Free Before Christmas
● Figure Out Debt
There are five major factors involved in figuring out debts. These include summing out debts and interest rates, prioritizing, affordability, choosing between urgent and non-urgent debts, and inability to pay debts.
Summing the debts is possible by contacting the lenders, taking out account statements, speaking to a customer care agent, etc. Priorities of debts would include rent, mortgage, energy & council tax, etc.
To become debt-free, have a roof, water, electricity, etc., it is essential to pay-off prioritized debts. They shouldn’t get mixed up with others. After this, plan out the budget for the month and the year. It should include food, household, water, service, and other expenses.
Make use of online tools to create a budget for your household. Make sure to pay for contract priority creditor. Otherwise, there is a high chance of getting evicted. Additionally, ask the lenders for debt advice and repayment solutions for the time being.
Next, move on to non-urgent debts, and start considering a debt management plan. It would incorporate paying off once for the month to a creditor, and he/she would handle remaining payments.
If you have no money to spare and face an “I need money now” situation, it is better to receive debt advice from an expert. Show your credit repayment history and rating to ask for the best suitable loan options and interest rates.
Debt management can become challenging for people handling multiple lenders, repayments, and lenders. Therefore, the best option is to go for a debt consolidation loan. It would combine all your existing debts and help to build a single monthly repayment plan.
However, to avail low-interest rates on debt consolidation loans, it is necessary to have a good credit rating. It would also help you to receive the best loan amount to clear your existing debts. But borrowers should pay keen attention to the repayment plan, monthly payments, and interest rates before deciding to opt for a debt consolidation loan.
According to Moneyfacts November 2019 research, 7.2 was the average interest rate on an unsecured personal loan. It was the percentage for three years and £5000 loan. A debt consolidation loan comes in both secured and unsecured loan options.
● Opt for Credit Cards
Besides the first two option, a person or a company can choose a zero transfer balance credit cards. These help the person or the organization get instantly free from existing debts and provide a single repayment plan option.
These type of credit cards come with low-interest rates. However, the companies often change the interest rates to a hefty amount after the initial zero transfer period finishes. Therefore, it is crucial to pay attention to the zero interest rate tenure on the credit card.
To ensure that there is no chance of hefty charges, the borrower should continue to make more than minimum repayments. Regular repayments higher than the minimum would ensure that the borrowed sum gets paid within the no interest rate period.
● Save Money
Another easy method of paying off debts before Christmas is setting aside a few amounts. Instead of availing an overdraft, go for a budget expenditure plan during the holiday season. Unfortunately, you might need to choose an overdraft over budget expenses to stray away from late payment charges.
However, guaranteed Christmas loans is another option to clear out instant debts. But they might have fewer choices for low-interest rates, as opposed to credit cards, and other secured loans.
● Switch to Better Deals
The last step that might even help to save money is switching to better deals. It means you should opt for subscriptions, bills, and expenses that can save household or holiday expenses. According to uSwitch, changing an energy firm could help to save as much as £447 yearly in the UK.
Also, since it is the holiday season, most service providers would come up with better deals than available throughout the year. It could relate to mobile, TV, and broadband packages. If you have saved money, it is best to avail such packages that suit your interest and save unnecessary yearly expenses. Unfortunately, service providers charge loyalty penalties that stick to a single service provider for years. On the other hand, people that switch to a new service provider often receive better deals than existing customers. Therefore, choosing a savvier is a better option as it helps to decrease Christmas household expenses.