Resolving to Pay Off Holiday Debt

With all the pressure society can place on us to spend more than we can afford on X-mas, for many Americans the new year rings in with the reminder of just how much debt we created. A time for resolving to pay off holiday debt! Even though most credit card companies have raised their minimum payments slightly (due to government regulations), credit card balances will simply not disappear anytime soon by making those minimum payments. In fact, many people are still paying for the last couple years worth of holidays. With many of us still trying hard to stick to those fresh new year resolutions, it's not to late to add one more to the list. Resolve to pay off that holiday debt. Whatever the situation might be, it will not get better on it's own. If you have the cash flow to just hunker down and make larger payments, do it. If you don't then consider your options. Do you have investment money you can tap into? How about equity in your home? Maybe just being frugal within your current budget can create more money to apply to that debt. Even if you have to team up together and work an extra job temporarily. What ever you have to do, just make a plan and do it! As you start to make some progress you'll receive at least one benefit almost immediately.

Improved Credit - The debt to income ratio is a key factor in your credit score. All 3 credit reporting agencies reflect this in your credit report. Always pay more than the minimum payment if you can. Focus on the credit cards with the highest interest rate first. By paying down those cards first will improve your debt to income ratio the quickest. This will make you look more responsible in the way you manage your debt. This way lenders will be inclined to give you a more favorable interest rate on a loan.

If you're able to, you can get a home equity loan. In most cases a home equity line will carry a much lower interest rate than your credit cards. If you do choose this route, DO NOT make the mistake of racking those credit cards back up. So many people make the mistake of thinking "we don't have any credit card balances, so our financial situation is fantastic". Yes, you may have more cash flow now that your debt is financed at a much lower rate. However, your financial life could come into serious jeopardy in no time with this mentality! Another option provided your credit is good would be to transfer those balances to cards with a prime or lower interest rate. Either way get rid of the credit cards you don't need! Do one of these options in a responsible way, and another benefit will come your way. Pay off that holiday debt and you'll increase your cash flow at the same time!

Improved Cash Flow - As with any loan in life, the less interest you pay the more money that is applied to the principal debt. This will not only allow you to pay off the existing debt sooner, but it will put more money in your pocket. An improved cash flow will enable you to lay off the credit cards and pay cash for purchases. So now your not only not using the cards, your paying them off at the same time. Look you work hard enough, now it's time to start working smart. Your money will go a lot further when it goes in your pocket, not the credit card companies.

One thing to consider, if you are able to tranfer balances to lower rate cards, do it. If you got the credit, open more accounts with low rates or even with 0% balance transfer rates if you have to. Even if they are temporary rates. Just make sure you pay attention and roll them before the rates go up. Do the home equity loan only if you don't have low rate credit cards to transfer the balances to or you can't get them. I say this because anytime you use your home for a loan it becomes collateral. If you don't or can't pay, your home could be at risk. Credit card debt is unsecured. The worst thing that could happen is your credit rating gets wrecked or you end up filing bankruptcy. Don't risk your home unless it's the only available option. No matter what route you decide to take, accept the responsibility for your credit card debt and resolve to pay off that holiday debt!