Welcome to 2021! We’re all hoping this year will be a bit kinder to us than the last, and everyone wants to get started on the right track. This, of course, starts with looking at the biggest monster of January – our holiday debt.
Your holiday plans were likely altered or cancelled entirely this year. There was no travelling, no big family dinners, and no office parties. The silver lining should have been a drop in the money we spent, but somehow holiday debt always finds a way to creep up on us. If you find that you’re in debt, despite thinking you spent less than usual, you’re not alone. The holidays are infamous for big spending, and this year you might have wanted to try to make the holidays feel a little more special.
Holiday debt happens. It’s how you deal with it that makes the biggest difference in your finances for the new year.
Pay off your credit cards
Sometimes, your holiday debt has an easy fix. Racking up lots of credit card debt isn’t ideal, but over the holidays, it can definitely happen. If the amount you owe is scary, but not drop-dead terrifying, your way out might not be too painful. Take a close look at your credit cards, and consider how much money you can contribute to those payments. If you think you can tackle your debt now, what’s the best way to start?
Quite simply, start making payments! You want to clear that debt quickly so you can get some of your credit back. If you owe any payments that aren’t too big, check those off the list first. It’s also a good idea to take on any payments with higher interest rates, so you’re not letting your debt grow exponentially. And if you can, make frequent payments! You’ll save money in interest so your payments won’t feel quite as brutal.
Of course, don’t bite off more than you can chew with your repayments. If you don’t have the funds to start your payments right away, don’t put yourself deeper into debt. When your holiday debt starts to go over your head, it’s time to consider your next options.
Refinancing to consolidate your debt
If you’re a homeowner, refinancing your mortgage could be a handy solution to consolidate that holiday debt. Refinancing basically means restructuring the terms of your existing mortgage and accessing equity to pay down some – or all – of your existing unsecured debt. With interest rates at all time lows, right now is a good time to consider a refinance. A lower interest rate will likely mean a lower mortgage payment, so you can use the extra cash flow to help pay off any of the remaining debt that isn’t consolidated into the mortgage.
Remember, refinancing to consolidate debt doesn’t magically get rid of your holiday debt for you. At the end of the day, you’re still paying back what you owe. Refinancing will restructure your current debt to increase your monthly cash flow, and lower the interest rate on your unsecured debt. You still need to have a strategy in place to manage your everyday expenses if you choose to refinance. You don’t want to max out your credit cards again and end up in deeper debt.
Is holiday debt really worth the process of refinancing? Refinancing might seem like a big move to make to consolidate your holiday debt. It’s not a solution for everybody, but a mortgage broker can help you determine if it’s the right option for you. Refinancing is not as intimidating as it might seem. If that’s the best step for you, we can help guide you through the process. You don’t want to be dealing with holiday debt all year!
Talk to a broker before you act
You might already have an idea about how you want to tackle your holiday debt. Or, maybe you’re still completely in the dark about your next steps. In any case, talk to a broker before you make a final decision! Brokers are informed and helpful, and they’re familiar with all aspects of holiday debt and repayment. Brokers are objective, and they work solely with your best interests in mind. Holiday debt doesn’t have to break you, and brokers can help you find the way out.
If you need help clearing out your debt so you can qualify for your mortgage, give me a call at (705) 333-4338 or get in touch with me here!