As we move into the holiday season, we often wonder how we will pay for Christmas gifts. If you already have balances owing on your credit cards, it may be tempting to consider consolidation of your debt to eliminate the credit cards, so that you have money to spend for the holidays.
Debt consolidation is a good idea to reduce the interest you pay, but be very careful not to fall into the holiday debt consolidation trap. The trap is simple: you consolidate your debts, but then spend more on your credit cards, so by the time the holidays is over, you have more debt than ever before.
A better strategy would be to consolidate your existing debts, and perhaps borrow a little more than you need to deal with your debts. For example, if you owe $18,000 on credit cards, and you plan to spend $2,000 this Christmas on gifts and food, go and get a $20,000 debt consolidation loan. You now have the cash to repay your debts and pay for the holidays.
Now for the trick: don’t use your credit cards this Christmas! You have the money you need, so put the cards away, so that at the end of the holiday season you don’t have any more debt.
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