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If Christmas and the surrounding gift-giving season left you hundreds of dollars in debt, you’re not alone. Americans spend more than $700 on average each year on gifts. But there are several tools to help you consolidate this debt and get your personal finances back on track.
Your debt may have increased because of holiday spending, but that doesn’t make it special to your creditors — which means it won’t be treated any differently when you decide to consolidate. When you’re ready to combine your payments, lower your interest rate or change your terms, you’ll typically choose from two main options.
Debt consolidation loans are unsecured and allow you to combine a number of debts — including your Christmas debt — into one term loan. You may be able to reduce your interest rate and the fees you pay or lower your monthly repayment by increasing your loan term. It’s all about determining what you need based on your budget. In general, you can expect a term of one to seven years. Rates may stretch up to 36% APR, but those with good to excellent credit could receive an APR in the single digits.
If you have debt across multiple credit cards, you may be able to consolidate your debt onto a balance transfer credit card. Many cards have an introductory rate as low as 0%, which can apply to your balance transfer for up to 21 months. As long as you repay the debt within that period and don’t use the card for additional purchases, you can pay down your Christmas debt at the promotional rate.
The best debt consolidation option depends on the type of debt you have and if you choose to consolidate more than just Christmas debt.
Balance transfer credit cards vs. debt consolidation loans
Debt consolidation loans and balance transfer credit cards each offer their own unique features. Take a moment to consider both before making a major commitment.
Before you jump into an application for a new loan or credit card, take a moment to understand your debt and prepare for your next steps.
The easiest way to avoid taking on debt during the holidays is to plan ahead and start saving up. According to our study on holiday spending, almost 60% of people use a credit card to pay for a portion of their purchases and another 11% rely on some type of loan — but that doesn’t have to be the case.
Here are a few quick ways to keep ahead of holiday debt:
If you do plan on paying for some of your gifts with a credit card, try to pay more than just the minimum each month leading up to Christmas. By getting gifts ahead of the holiday season, you can keep your total debt down and avoid one big bill come January.
Consolidating Christmas debt doesn’t have to be a post-holiday nightmare. Even if you don’t choose to combine it with any of your other debts, simply lowering your monthly payment or getting a better deal on your APR can help reduce your costs now so you can start saving for next Christmas.
If you’re ready to switch things up, read our guide on debt consolidation to learn more about the specific options available to you.
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