How to Successfully Manage Your Debt for the Holiday Season

Estimated reading time: 3 minutes

The Holiday season is fast approaching! Before you tackle your gift list, ensure you have a budget in place. According to CBS News, consumers spend more during the holidays than any other time of the year. In fact, Nerdwallet reported that 28% of American shoppers who used credit cards haven’t paid off the presents they purchased in 2023.

Keep your holiday spending budget friendly with these debt management tricks!

Change Your Gift Giving Approach

You can still treat the ones you love without stretching your budget. Take advantage of pre-holiday sales or split the cost of a gift with loved ones. Above all, enjoy the time you spend with them.

Know How Much You Owe

When you’re creating your budget, be sure to lay out all your debt. Using your credit report and purchase reports, you can create an organized list or spreadsheet of your current costs.

Be sure to include the following:

• The creditor, or institution you’ve borrowed money from
• The total amount of money owed
• Your monthly payment amount
• The interest rate
• The payment’s due date

With all the information in front of you, you’ll be able to easily track your progress. As you pay down your debts, you can update your list to reflect the new balances and celebrate your progress.

Identify Which Debts to Pay Off First

Not all debt is considered unhealthy. Some are necessary, such as your student loans or home mortgage. Others, such as high-interest loans or credit cards, can harm your credit. When creating your budget, determining which debts take priority is crucial for developing a winning approach.

Find a Pay Down Strategy that Works for You

In addition to making minimum payments every month, experts recommend working on a long-term debt management approach. You’ll feel more secure with everyday expenses and keep yourself from falling into the same debt-accruing habits.

Should You Use Buy Now, Pay Later?

According to a Nerdwallet report from April 2024, 25% of Americans surveyed had used Buy Now, Pay Later services in the past 12 months. Buy Now, Pay Later (BNPL) plans allow you to complete a purchase and pay it back through a series of scheduled installments instead of in full. These payment plans are loans through a credit company outside of the merchandiser or retailer. Unlike opening a store line of credit, BNPL loans are tied to one purchase.

Many regulators and analysts refer to these loans as phantom debt, as BNPL companies generally don’t report information to the major credit bureaus. Without thorough reporting, it’s hard for experts to know how rapidly National BNPL debt is growing. Additionally, consumers wouldn’t receive the on-time payment benefits to their credit score.

Know How Debt Affects Your Eligibility

When determining your mortgage eligibility, your lender will pay close attention to your debt-to-income ratio, also known as your DTI. This is used to gauge if your income can support the amount of debt you have—and if you can financially manage a mortgage payment in addition to your existing debt.

Get Yourself Mortgage Ready

While our Loan Originators are not credit repair specialists, they can connect you with a Fannie Mae approved platform for credit coaching. Ready to take control of debt and prepare for homeownership? Contact us to get started!