A recent survey revealed that 36% of consumers took on a holiday debt which is a testament to the financial struggles faced by a portion of the American population.
New research by LendingTree revealed that this holiday season, about 36% of consumers racked up debts, with the average amount ballooning to $1,181, up from $1,028 in 2023. While this is still a notable increase from last year, the figures were still down from $1,549 in 2022.
However, the worrying part the research outlined is that 60% of them who took on debt were stressed about it, with 69% being parents of young children. This highlights the financial hardships normal consumers face during the holidays, NBC reported.
Matt Schulz, Chief Credit Analyst at LendingTree, noted that Inflation-driven price increases continue to be a major problem. These increases aggravate these financial challenges and make it more difficult for consumers to control their spending over the holidays.
“Some of it is people just wanting to wrap up what’s been a difficult year by spreading a little joy, and maybe they ended up taking on a little bit of extra debt to do so,” Schulz said.
Parents of young children, as the study found, make up 48% of debtors this holiday season. People with modest earnings and millennials (those between the ages of 28 and 43) are among the most likely to incur debt over the holiday season. The financial strains experienced by these groups are highlighted by the fact that 42% of millennials and 39% of those making between $30,000 and $49,999 accrued debt, according to LendingTree.
A WalletHub survey reveals that 68% of Americans expect a less generous holiday season due to inflation, with 47% still paying off last year’s holiday debt and 52% planning to apply for new credit cards.
So, people who are feeling bogged down by too much debt, here’s how you can pay it off:
Lower your interest rates:
The LendingTree survey says 42% of holiday debt holders pay over 20% interest or higher.
You can reduce your interest by opting for 0% balance transfer credit cards as it offers interest-free payments for a predetermined amount of time.
“There’s really no better weapon against credit card debt than a 0% balance transfer credit card,” Schulz said.
Most offers provide either 12 or 15 months without accruing interest on the transferred balance, he said. However, a fee for transferring the balance may apply.
Pick a debt pay-down strategy that suits you:
Choosing a strategy that works for you and keeps you motivated is essential to paying off debt. The avalanche approach, which gives priority to high-interest debts, and the snowball method, which starts with smaller balances, are two well-liked strategies.
Experts recommend choosing the approach that helps you feel like you’re making progress, ensuring you stay committed to becoming debt-free.
Sell Unwanted Things to Get Debt Relief:
Consider selling things you no longer need or want if you’re having trouble paying off your holiday debt. You can get money from unwanted items by holding a garage sale or selling them online on sites like eBay and Facebook Marketplace. This can assist you in getting back on track financially and earning some additional money to pay off your debt.
The Benefits of Debt Consolidation:
By consolidating several obligations into a single loan, debt consolidation helps you better manage your money. With just one monthly payment, debt consolidation can streamline your budgeting process and, if the new loan has a lower interest rate, result in financial savings.
“If you have debt and don’t at least consider consolidation, you’re doing yourself a disservice,” he says. “Whether you’re talking about a 0% balance transfer card or a low-interest personal loan, consolidation can save you a ton of money in interest, shorten your payoff period in a major way and trim your to-do list because you’ll only have to worry about one bill instead of several,” Schulz said.
Increase Your Savings:
Though cutting down debt may be the primary goal, if possible, try to keep aside some funds for emergencies. This helps to deal with any unplanned expenses. It also helps you cover the next holiday season without relying on external finances such as credit cards or loans.
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