Loans Aren't Just for the Holidays: How to Survive the Debt Hangover

Loans Aren't Just for the Holidays: How to Survive the Debt Hangover

Christmas is almost around the corner, which means it's time for lights, carols, overindulgence, gift-giving, family get-togethers, and an increase in personal debt. It's a sham.

However, for many individuals, Christmas is a stressful time of year since they can't afford to purchase gifts for everyone on their list. In many cases, it is the doorstep lenders rather than the borrowers and their families that benefit from these individuals. It's easy to fall into the trap of using a credit card or taking out a loan that will never be repaid because of the temptation. Sadly, this may lead to terrible long-term consequences, as the recent spike in the number of repossession order applications demonstrates.

However, adhering to a few easy guidelines might help you avoid a financial hangover during the holiday season.

Avoid ignoring the issue at hand. Debt problems become worse the longer they are ignored.

The National Debtline (0808 808 4000) is a free service that provides debt counseling over the phone, as well as booklets and data sheets, as well as personalized debt management programs.

The next step is to maximize inbounds and minimize outbounds. Be on the lookout for ways to save money. As a result, online stores don't have to spend money on pricey storefronts, which means that shopping for gifts online may save money. If you see a sale, take advantage of it.

If you currently owe money, you should be careful about borrowing any additional money without first seeing a skilled independent financial advisor.

You would think that taking out a low-rate secured loan to cover previously unsecured debt would make sense, but if you fail to make the payments, you risk losing your home. The safety of your house may be at risk if you have unsecured debts. High-street lenders are increasingly instituting "charging orders" on borrowers' houses in an effort to recoup delinquent payments, according to debt counseling organizations. In other words, the lender may alter an unsecured loan arrangement to one that is secured against the borrower's residence while still charging unsecured interest rates by going via the court system. Taking out a larger loan and repaying it over a longer period of time can result in higher long-term interest costs if you want to consolidate your debt.

If you're considering taking out a loan, make sure you shop around for the best possible interest rate. Major financial institutions like Barclays and Moneynet offer free online tools for comparing the rates of various types of loans, including both secured and unsecured loans, as well as unfavorable loans.

Regardless of how terrible the situation seems, never use a doorstep lender. Money Box recently exposed the predicament of residents in Southampton, where the median doorstep lender's APR was a whopping 177%. Those who are attempting to regain control of their money on a low salary may find themselves in even more financial trouble as a result of this. Community Development Finance Institutions (CDFIs) are new efforts for those who have had difficulty obtaining loans at a reasonable rate. These institutions, which get funding from a combination of public and private sources, including a number of big banks, focus on giving personal and small-business loans to those who have been turned down by traditional lenders. In general, CDFIs charge annual interest rates of up to 24 percent, which is higher than many standard non-adverse high street loans due to the increased levels of risk and additional advice associated with this type of lending, but it is also significantly lower than unregulated alternatives.

Paying down current debt requires prioritizing which obligations are most critical and tackling those at the top of the list first. Mortgage and rent payments should be paid first, followed by utility and council tax payments. Then, unsecured debts should be tackled.

Additionally, it is critical to verify that you are receiving all of the money that you are entitled to. If you're having problems with debt, benefits, housing, the law, discrimination, work, immigration, or other consumer difficulties, contacting your local Citizens' Advice may be a good place to start. They'll be able to provide you with advice on just about everything, including whether or not you're eligible for any government benefits.

Debt difficulties might feel insurmountable at any time of year, but during the Christmas season they can be especially daunting. Budgeting and smart shopping are good places to start. Maximize your inflows and minimize your outgoings. It is possible to regain control of your money and have a joyful Christmas if you use free internet information comparison sites like Moneynet and talk to free independent guidance agencies like National Debtline and Citizens Advice.