In January, reality suddenly takes hold. The excitement of holiday shopping fades into a feeling of depression. Dr. Cliff Arnall of Cardiff University says that around January 22, people experience “the worst day of the year,” due to weather, debt, time since Christmas, time since failing New Year’s resolutions, low motivation levels, and the feeling of a need to take action.[1]
This low feeling may turn into serious panic when you suddenly realize that credit card debts must now be paid. If you have thrown caution out with the budget during the holiday season, then it’s time to get back to business, to look ahead, review all your debts and prospective income for the year, and figure out a plan.
First, take a look at whether you can meet your monthly payments. Also, take a look at how long it will take to pay off the debts.
Now examine your income and other commitments:
- Is there enough to pay off the debt within a reasonable time?
- If not, is there a way to raise cash?
- Avoid some unnecessary expenses?
- Trim the budget to allow more money to pay on your credit cards?
If you establish that you cannot make the payments on time, the next step is to look at debt relief options, such as debt settlement or debt consolidation.
Debt settlement simply means that you call up the card company and negotiate to reduce the debt. If you don’t want to do it, a lawyer or a debt settlement company can do it for you. You may be able to pay a substantially lower amount over a shorter period of time, with a minimal effect on your credit score.[2] This is preferred over debt consolidation, also often recommended.
With debt consolidation, you will request one large loan to pay off smaller debts. Your amount of debt is not reduced, and the loan will have a fixed rate of interest, possibly a lower rate than your credit card. This could save you money in the long run and your credit rating will not be hurt.
If you are lucky enough to be able to get a zero percent credit card and are able to transfer your other card debt to it without a large transfer fee, you will be able to pay the debt off more quickly.
If you feel you can’t handle your debt problems on your own, a credit counseling service will be able to help you figure out the plan that is best for you and help you with budgeting techniques.
[1] http://www.netdoctor.co.uk/diseases/depression/januaryblues_000612.htm
[2] http://www.debtreliefadvocates.org/debt-settlement/
