If you overspent at Christmas, don’t worry – you are not alone. Millions of people in the UK and Ireland have done exactly the same with most of them depending on credit cards and store cards to see them through the festive season. January is the month of reckoning and the bills are beginning to come in. Here are a few ideas to deal with payment, if you are struggling with your finances.
Credit Union Loan
Credit Unions offer plans to tackle credit card debt so the first step is to become a member of your local Credit Union and to start saving with them. Second step is to cut up your credit cards. Apply to the Credit Union for a loan sufficiently large to clear your credit card debt. If your credit history is reasonable there is a good chance that you will be approved for the loan which is usually paid down in three instalments. The first instalment is paid to the credit card company and you pay the interest on the credit card for the next two months. At that time you furnish the two credit card statements (showing the interest paid and no spending on the card) to the Credit Union which then pays the second instalment directly to the credit card company. You continue to pay the interest on the credit card debt and again after two months you furnish two more statements to the Credit Union again showing that you have made the interest payments and that you have not spent on the card. The Credit Union then pays the third and final instalment of the loan clearing the credit card account and all you are left with is to repay the Credit Union loan over a reasonable period of time and at a reasonable interest rate.
Savings
Sounds crazy but many people have savings earning very low interest while paying exorbitant interest rates on their credit cards. If you are lucky enough to have savings, use them to clear your credit card debt.
Sell Assets you Do Not Need
Do you really need a car? Do you really need a second car? Can you manage using public transport and the occasional taxi? Apart from the sales value of the asset, think what you will save in fuel, road tax, insurance, maintenance and so on. Perhaps you have a holiday home that you do not need. Do you have other goods in your attic or garage which could be sold at a car boot sale or at auction? The tip is to sell off unnecessary assets and pay off your credit card debt.
Mortgage Payment Holiday
A (financial) health warning comes with this tip. You simply must get the prior agreement of your mortgage provider before availing of a mortgage payment holiday. Provided it is approved, you can use the ‘savings’ to pay down your credit card debt. This approach is more likely to be approved where your mortgage is with the same bank as your credit card account.
Ask a Friend
Most people turn to family and friends when they are in trouble. When the trouble is financial, there are some additional matters to worry about. On the plus side, a loan from a family friend is often given interest free. On the minus side, friendships can be put at risk if you default on agreed repayments. It makes sense to agree and document such a loan as well as the repayments terms and the duration. Be very careful if you intend to try this tip.