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Author: SimonDuffy Article source: http://www.articlealley.com/. Used with author's permission.
Christmas is always a boom period for finance companies, they tempt people with 0 per cent and ?no repayments until next year' offers, to ?help' you cover the additional expense of Christmas.
Consequently people often end up splashing out and borrowing more than they originally intended to, or worse still they end up with debts they cannot afford to repay.
January is traditionally even busier for loan and credit card companies as the people who've over spent look to consolidate the debt into one manageable monthly payment.
There are a few easy steps you can take to try and avoid over spending this year and get through without a mountain of debt;
1. Try and use a 0 per cent method of payment. There are many credit cards offering 0 per cent on purchases for a minimum of 3 months. This should give you until the end of March 2008 before you start paying interest on the amount you've spent. Beware that if you have also transferred a balance onto a credit card like this, the card company may put any payments you make towards paying off the balance you've transferred before paying off the purchases you've made. This is because they will make far more interest, usually around 16 per cent APR on purchases after the 0 per cent offer finishes, while most balance transfer 0 per cent offer last for 12 months, some as long as 18 months.
2. Don't take out a loan to get through the expensive Christmas period. You might think it a good idea to take out even a small loan, like £500 - £1000, just to tie you over until the New Year. However, even if you have a good credit rating small loan amounts are usually always charged at higher a rate APR because the loan companies have less of a lump sum to make interest on, because you're borrowing a small amount of money. Often companies who are willing to lend smaller amounts will charge staggering APR's. I've just used a financial comparison web site to estimate the cost of borrowing £1,000 over 6 months. One of the companies had a total repayment of £1340 in just 6 months, that's 183.2 per cent APR!!
3. After Christmas make sure you put all your efforts into repaying the 0 per cent debt as quickly as possible. This way you will limit or avoid the interest you're charged after the 0 per cent period expires.
This is by no means a guaranteed solution to avoid debt but should give you a good chance of avoiding hideous APRs and ?burying your head in the sand' tactics.
Simon Duffy writes for the Financial Blog a UK Finance Blog talking about all aspects of personal finance including loans blogs, credit cards blogs, mortgages blogs, insurance blogs and more.
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