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Published on December 29, 2021 | Webster Bank
Like almost everything else during the pandemic, your holiday spending was probably different than in years past.
In fact, a recent U.S. News & World Report Survey revealed:
While neither of these trends is surprising given the pay cuts, job losses and business shutdowns that the pandemic has caused these past couple of years, debt from gift-giving can end up being more expensive than you realize.
For example, let’s say you charged $699 to a credit card — the average amount Americans said they planned to spend on holiday gifts this year. At an average rate of 14.58 percent and making only a minimum $28 payment each month, it would take you 52 months to pay off the balance. And, by the time you paid it all off, you would have actually spent $915.
It’s always best to pay off credit card balances as quickly as possible to limit interest rate charges that add to your balance every month. However, with lending rates still at historic lows, this year you have a chance to bring down your holiday debt, consolidate other debt and even refinance a mortgage, if you have one.
Among the options you may want to consider to help take firm control over your debt:
Personal loans1. If you qualify, you can get the money you need to consolidate debt and pay off a high-interest credit card. And at today’s low rates, you may be able to gain some breathing room by paying off everything at once and then just make a single payment every month to pay back the loan.
Home equity loans/line of credit. If you own a home and you want to pay off holiday bills along with other sizable debt (e.g., $10,000+) you may have racked up, consider your house as a cash reserve. You can tap into the equity that you’ve built up over time to pay for things you may need now like debt reduction.
With a home equity loan, you get a lump sum; whereas with a line of credit, you draw upon the funds as you need them. Either way, with a low rate and flexible repayment terms, they may provide a more attractive option for managing all your debt.
Refinancing. If you qualify, you may be able to lower the interest rate on your current mortgage loan by refinancing. With a lower rate, you may be able to reduce your monthly payment, improve your current cash flow and save thousands of dollars over the long-term.
Need help to talk through rates or your options? Give us a call.
Look for the most favorable rates for debt consolidation, loans or mortgage refinancing. Local banks can usually offer better rates than you’ll find online, especially if you have an existing relationship with one.
Get an annual financial check-up. Webster Bank offers this service at no charge and can give you an organized, clear review of your entire financial picture, including your assets, resources, and guidance for how to realistically and effectively tackle your debt.
The bottom line is… once you can get your debt in line, you can concentrate on how you can move closer to more important financial goals.
The opinions and views in this blog post are those of the authors, and are not intended to provide specific advice or recommendations for any individual. Please consult professional advisors with regard to your individual situation.
All loans and lines of credit are subject to credit approval.
1Personal loans are only available for Webster customers that have had a Webster personal checking account for at least 6 months.