The Ultimate Holiday Debt Survival Guide for 2017

Millions of Americans have an overwhelming amount of debt, and during the holidays, many consumers spend more than they have. Don’t fall victim to overspending and accruing debt this holiday season. You can still love and celebrate the holiday season without overspending on holiday gifts, food, decorations, lights, and entertaining. After all, the holidays are a time to gather with friends and family and to be grateful for what you have!
We compiled the ultimate holiday survival guide to get you through this season of giving without going into debt. Here are five tips to help you spend wisely and protect your finances.
1. Create a Holiday Budget
You might be tired of hearing about budgeting, but if you’re serious about not overspending this holiday season, you should make a holiday budget. It’s important to be realistic—don’t make guesses if you can avoid it. Look back on how much you spent last year to guide you as you create your budget, and see where you could cut back.
The key to staying on budget is proper organization so you can have a holiday season that’s free of financial stress. When it comes to gift giving, be sure to make a list and check it twice. Don’t feel pressured to give to friends or extended family if your budget doesn’t allow it.
2. Use Cash
It can be discouraging to start off the New Year already behind on the eight ball in money matters. To avoid a financial hangover in January, you may want to consider using cash or a debit card for your holiday purchases—instead of a credit card. By having cash on hand when holiday shopping, you will be less likely to go over budget. You’ll be forced to spend only what you have available as opposed to a large credit line.
If you do plan to use a credit card, remember that you’ll have to pay interest on your purchases if you don’t pay the entire balance in full. Be sure to add due dates to your calendar for each of your credit cards and schedule a reminder on your phone. Overdue payments can hurt your credit score and push you further into debt with late fees.
Additionally, learn to prioritize your bills. Pay off the card with the highest interest rate first—otherwise you’ll pay more over time. You should also consider dropping any retail credit cards after you’ve paid them off. These tend to have the highest interest rates and limited benefits.
3. Plan Ahead
Last-minute shopping is stressful, and it can also be costly. If you’re in a rush, you’re more likely to forget about your budget and instead grab what is most convenient. Taking the time to research the best deals, sales, and prices can save you time and money. Try spreading your holiday gift purchases throughout the year, in place of doing it all in December.
4. Get Creative
If your budget doesn’t allow you to buy for everyone you would like to this year, a great alternative is a holiday grab bag. With a grab bag, everyone buys a few small gifts to wrap and throw into a bag or a box, then each participant randomly picks one gift at a time until all the gifts are gone. Anyone who would like to participate should agree to a price that fits into everyone’s budget and how many gifts each person should buy. This is not only frugal but also fun!
If you’d rather stick to traditional gift giving, get creative with it. Try making do-it-yourself projects or crafts—a homemade gift is much more sentimental than a store-bought one anyway. For your children’s teachers or coaches you would like to include in your holiday list, consider gift cards, home-baked goodies, or both combined. Gifts don’t need to be lavish to show someone you appreciate them.
5. Implement Damage Control 
If it’s too late and you’ve already overspent this holiday season or are already in deep credit card debt, don’t panic. There are ways to recover and do damage control after the holiday season is over.
The most important thing of all is committing to paying off your debt. It might be easier to simply continue your regular spending habits and pay the minimum balance when you remember. But giving debt priority, even when it’s an insignificant amount, will do wonders in helping you maintain good financial health.
With all the new items you’ve received during the holiday season, you might have some older things you can sell. Clothes, electronics, and even books could earn you a little extra cash to help pay off your debt. Amazon, eBay, and your local consignment shops or thrift stores are fantastic venues for selling your unwanted stuff.
Take a look at your budget and make sure you set aside enough money each paycheck to make at least double the minimum payment. But if you can manage it, you should aim to pay much more than that. Fine-tune your budget to see where you can cut back so you can make more substantial payments to your credit cards. The sooner you’re out of debt, the sooner you can start putting that money where it really matters.
Don’t let your finances take a major hit this season. Follow these tips to avoid overspending, and keep an eye out for other common holiday pitfalls. By building more frugal shopping habits, you can also improve your credit score. If you’re curious about how your credit’s faring now, take a free look at your credit score through Credit.com.
Image: gilaxia 
The post The Ultimate Holiday Debt Survival Guide for 2017 appeared first on Credit.com.
Source: Ramsey Debt Relief Feed 1

Will Debt Consolidation Help or Hurt Your Credit?

From student loans to a house mortgage, debt accumulation is stressful and overwhelming. As you make moves to get out of debt, you might want to consider consolidating credit cards or other loans to save you time and money. But that begs the question—does debt consolidation help or hurt your credit?
The answer depends on how you consolidat­e and what you do with your debt afterward.
1. Debt Consolidation Loans
Getting a new loan to pay off other debts is the most popular way to consolidate. It’s certainly what most people think of when they consider consolidation. But finding a loan that has decent terms and is designed specifically for the purpose of consolidation can be challenging—especially if your credit scores are a bit lower due to the balances you’re carrying.
It’s certainly not impossible, though. Look for reputable debt consolidation companies that will work for your specific situation.
Tip: Triple check lenders’ certifications to make sure you’re dealing with a legitimate site if you’re shopping for a loan online. Scams abound.
Effect on Your Credit: Consolidating credit cards with high balances using an installment loan (i.e. a loan with fixed monthly payments) may actually benefit your credit rating, especially if you use the loan to pay off credit cards that are near their limits. At the same time, any new loan can cause a short-term dip in your credit scores—so don’t be too surprised if you see your credit score change slightly when taking out a new loan.
2. Debt Management Plans
Debt management plans are often confused with debt consolidation—however, they’re very different programs. Debt management plans (DMPs) are offered through credit counseling agencies and, much to many people’s surprise, they don’t actually consolidate your debt.
Instead, you make a “consolidated” payment to the counseling agency, which then pays each of your creditors—usually at a reduced interest rate. Even though you’re making only one or two monthly payments, the counseling agency doesn’t actually pay off your creditors for you—it simply acts as a middle man to help you repay your debts and ensure that the creditors get the money they’re owed. These programs are available regardless of credit scores, so if you are having trouble consolidating, a DMP might be worth considering.
Tip: If you choose to move forward with a DMP, you should close or suspend your credit card accounts. Unfortunately, you’re not permitted to use credit cards while enrolled in a DMP.
Effect on Your Credit: If you have a good credit score and adhered to a creditor’s repayment terms in the past, a DMP could have a negative impact on your credit as it indicates that you are experiencing or have experienced difficulty with payments. Also, since a DMP directly impacts payment terms, credit reporting agencies might ping your DMP commitment because it designates a change in payment policies.
3. The Credit Card Shuffle
Transferring a high-rate credit card balance to a card with a lower rate is another way to consolidate. Carrie Rocha, author of Pocket Your Dollars: 5 Attitude Changes That Will Help You Pay Down Debt, and her husband paid off some $60,000 in debt, and taking advantage of low-rate balance transfers was one of the strategies they used to dig out. However, if you decide to go this route, you must be very disciplined in your approach. Otherwise, you may fall into traps such as getting stuck with a balance at a high interest rate after the introductory period ends.
Tip: Read the fine print. Keep your eyes peeled for any “but” or “until.”
Effect on Your Credit: It depends on how you use a transfer. You’ll often see a temporary dip in your credit score when opening any new card. If you use a substantial portion of the available credit (on the card) to consolidate balances from other cards with lower balance-to-available-credit ratios, your credit scores may drop from that as well. Finally, you may also lose points if you open a new card and use a majority of the credit line to consolidate.
However, if a 0% card allows you to save money and pay off your debt faster, you can come out ahead in the long run, both financially and credit score–wise.
The End Goal: Less Debt Equals Stronger Credit
Paying down debt can have a tremendous impact on your credit scores. According to FICO, the company behind most of the credit scores used by lenders, consumers with high credit scores (e.g. 785 and above), tend to keep their balances low. Specifically, two-thirds of consumers with good credit carry less than $8,500 in non-mortgage debt, and they use an average of 7% of their available credit on their credit cards.
That means that paying off debt—whether you use a consolidation loan or just put every penny you can toward your debt—will often improve your credit ratings in the long run. The biggest risk, though, is that it’s easy to run up new balances on the cards you paid off in the consolidation—and that’s definitely not a good move for your credit or your bottom line. As you make progress on paying off your loans, periodically check your free credit report to see where you stand.
Remember, moving debt is a means to your end. The goal is to pay off those balances and free up cash flow as well as to help build strong credit. So whether it’s a consolidation loan, credit card shuffle, or DMP, know your options so you get there just a little faster.
Image: mapodile
The post Will Debt Consolidation Help or Hurt Your Credit? appeared first on Credit.com.
Source: Ramsey Debt Relief Feed 1

Trapped in Payday Loan Debt? Here’s How You Can Escape.

Nobody likes being in debt, but it’s even worse when it seems like there’s no way out. That’s how the 12 million Americans who take out payday loans each year usually feel. That’s understandable, considering they pay out around nine billion dollars in loan fees. But there is hope—you don’t have to be stuck in the payday loan debt cycle forever.
Why It’s So Easy to Get Buried in Payday Loans
Payday loans are unsecured personal loans targeted at people who need money fast but don’t possess the type of credit or collateral required for a more traditional loan. Usually the only requirements to qualify for a payday loan are an active bank account and a job. Companies like MaxLend, RISE Credit, and CashMax have made an art out of providing high-interest loans to people who feel desperate and out of options.
The very structure of payday loans is set up to keep people on the hook. Here’s a breakdown of what payday loan debt looks like, according to the Pew Charitable Trusts:

It’s not short-term. Although payday loans are advertised as quick, short-term loans, the average payday loan borrower is in debt for a full five months each year.
Loan fees are huge. Average loan fees are $55 every other week, and the average borrower pays $520 per year for multiple loans of $375.
People borrow for the wrong reasons. Most payday loan borrowers—70%—spend the money on everyday expenses, like groceries, gas, and rent, rather than on emergencies.
It’s a vicious cycle. To totally pay off a loan, the average borrower would need to fork over $430 the next payday following the loan. Because that’s a big chunk of change, most people end up renewing and extending the loan. In fact, 80% of all payday loans are taken out two weeks after another one was paid in full.

What Happens If I Don’t Pay My Payday Loan?
As with any other loan, if you default on a payday loan, it can result in growing fees, penalties, and possible legal action. Because many payday loans use automatic debit payments to take funds directly out of a bank or prepaid account, you can also end up with overdraft fees on top of everything else. This can leave you without the funds you need to pay for necessities like food, childcare, and utilities. To top it all off, you may also experience a barrage of calls and threats from debt collectors.
This all sounds extremely unpleasant, but there are ways you can get help with payday loans.
How to Get Out of Payday Loan Debt
As we’ve established, it’s crucial to stop the vicious cycle of payday loan debt. There is payday loan help, but it can be hard to know where to start.
The best way out can depend on where you took out the loan. Laws governing payday loans vary from state to state. Some states, like Colorado, are currently working to change the way payday loans are administered in order to make it easier for customers to pay loans back and avoid the snowball effect of constant loan renewal. Other states require payday lenders to offer borrowers an  Extended Payment Plan (EPP), which stops the accrual of fees and interest.
Here’s a closer look at some of the options available to get rid of payday loan debt.
Extended Payment Plans (EPPs): If you borrowed from a lender who is a member of the Community Financial Services Association of America (CFSA), then you may be in luck. CFSA’s Best Practices allow a payday loan customer the option of entering into an EPP.  This means you’ll have more time to repay the loan (usually four extra pay periods) without any additional fees or interest added for that service. Best of all, you won’t be turned over to collections as long as you don’t default on the EPP. Here are the steps to follow if you want to apply for an EPP:

Apply on time. You must apply for the EPP no later than the last business day before the loan is due.
Sign a new agreement. If you took out your loan through a storefront location, you’ll have to go back to that location to turn in your application. If you took out a loan online, you’ll need to contact your lender for instructions about how to sign your new agreement.

Credit Counseling: If an EPP isn’t an option, you may want to talk with a credit counseling agency. While credit counseling agencies spend their time helping consumers get out of debt, these kinds of loans can present unique challenges. “It’s not a traditional loan with set guidelines in terms of how they work with us,” explains Fox. In spite of those challenges, there are things a credit counseling agency can do to help you get out of payday loan debt:

Restructure the payback. Fox says that payday lenders who are members of the CFSA “seem to be more lenient” and are “more apt to try to work with people.” Those lenders will often “restructure to pay back (the balance) over six to twelve months when coming through our program.” But he also adds that this applies in  only about 40–50% of the payday debt situations clients are dealing with.
Negotiate a settlement. If restructuring the payback terms isn’t an option, the credit counseling agency will try to work with the lender to determine a settlement amount that will resolve the debt altogether. If you can pay off the loan with a lump-sum payment (this is the time to ask Mom or Dad for help), the agency may be able to settle the debt for a percentage of the outstanding amount.
Adjust your budget. If no other options are viable, the agency can work with you to come up with a budget that will help you find the money to get the loan paid off. Sometimes that means reducing payments on other debts, consolidating debts, or reprioritizing other expenses.

Bankruptcy: Nobody wants to resort to this option, but sometimes it’s the only way to get out from under this kind of debt. There is a myth out there that you can’t include payday loans in a bankruptcy. However, that is not the case: “For the most part, payday loans aren’t treated any differently in bankruptcy than any other unsecured loan,” writes attorney Dana Wilkinson on the Bankruptcy Law Network blog.
Another unsubstantiated claim is that you may be charged with fraud or arrested if you can’t pay a payday loan back or if you try to discharge the loan. One of the reasons this fear is so widespread is that payday loan debt collection scammers often make these kinds of threats, despite the fact that these threats are illegal.
What to Do After You Get Rid of Payday Loans
After you get out of payday loan debt, you want to make sure you never go to a payday lender again. Some of the smartest things you can do to start cleaning up your credit include signing up for a free credit report. Regularly checking your credit is the best way to make sure you clear up any mistakes. Plus it’s rewarding to see your credit score improve.
You can also sign up for credit repair or search for a consolidation loan to help you pay off all of your debt. This allows you to start moving in the right direction financially.
Getting out of payday loan debt can seem daunting, but it’s worth the effort and hard work. Taking control of your finances—and actually being able to plan for the future—is a reward worth striving for.
Are you trapped in payday loan debt? Or have you found your way out? Share your story in the comments below.
Image: Ingram Publishing
The post Trapped in Payday Loan Debt? Here’s How You Can Escape. appeared first on Credit.com.
Source: Ramsey Debt Relief Feed 1