Even if we didn’t overspend at Christmas, it somehow feels as if we did. Spending just seems to expand so as to consume all available cash and then some. It doesn’t seem to matter if we are paid weekly or monthly, Christmas just seems to be like a good vacuum cleaner, sucking up every spare penny.
If we are living on a pension or are unemployed and living on benefits, January can be a painful month financially speaking. While it also seems like a lonely month we are not alone. There are millions of people just like you and I in the UK and Ireland who have done exactly the same as us this Christmas. When the cash ran out we turned to our credit cards and store cards to see us through the festive season. January is the month of reckoning and the bills are beginning to arrive. Now is the time to be creative and to consider how to deal with payments. What are the options? Here are a few ideas.
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 an appropriate loan which is often paid out in perhaps three instalments.
The first installment is paid directly 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 generally at a reasonable interest rate.
At least some people have moderate savings which they tend to forget about as they try to deal with their recently inflated credit card debt. They consider the savings as if they are some sort of nest egg or a sort of contingency fund for a rainy day. Even if their savings are earning very low interest they are reluctant to touch them. How naïve is that? The rainy day has arrived. If you are lucky enough to have savings, use them to pay off or reduce your credit card debts rather than paying exorbitant interest rates to your credit card providers.
If you have a car or a second car do you really need it? Can you manage to get around using public transport and the occasional taxi? Apart from the sales value of the asset, think what you can save annually in fuel, road tax, insurance, wear and tear and maintenance. Or maybe you have a holiday home that you do not need. Perhaps you have other goods in your attic or garage which could be sold at a car boot sale or at auction. Why not sell off unnecessary assets to help pay off your credit card debt?
Mortgage payment holiday
If you have a good relationship with your mortgage provider perhaps you can negotiate a mortgage payments holiday for few months and use the savings to pay down or pay off your credit card debt. If you succeed in this strategy, remember that there will be a price to pay to your mortgage provider. It could mean a modest increase in your monthly mortgage payments for the remaining term of your mortgage or it could result in an extension in the remaining term of your mortgage or perhaps a combination of both. This approach is more likely to be approved where your mortgage is with the same bank as your credit card account.
Can family or friends help?
People often 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 approach.
Speak to a debt advisor
If all else fails and you find that you are really struggling with your debts and need help, then speak to a debt advisor to get free advice on what other options are available to you. It could be that an informal debt solution such as Debt Management or a more formal solution, like an IVA might be able to help your situation. You could also use our free and confidential online debt chat service on this page to chat to an advisor.