Think ahead this Christmas and avoid a debt hangover in 2013

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AS Christmas approaches, the Consumer Finance Association has issued a guide on how to avoid a long financial hangover into 2013.

It recommends setting a budget and sticking to it, including regular outgoings as well as unusual events and purchases, and looking for good deals including pre-Christmas sales and multi-purchase deals.

To make money while you spend, cashback websites can help to balance the books, but often do not pay out until several weeks or months after the original transaction.

The CFA says shoppers should only borrow what they know they can afford to repay and should only do so from a reputable lender, such as the CFA, the Finance and Leasing Association, the British Cheque Cashing Association or the Consumer Credit Trade Association. They should also consider their ability to repay the money if their circumstances changed, such as through redundancy or pregnancy.

Finally, the CFA urged people who are already over-stretched not to take out additional loans to help pay for Christmas. Instead, independent advisers – such as the Money Advice Service, National Debtline or StepChange Debt Charity (formerly the Consumer Credit Counselling Service) can help to organise finances for people whose outgoings exceed their incomes.

CFA chief executive Russell Hamblin-Boone said: “A short-term or payday loan is, for some, a better option than overdrafts or credit cards because it limits the Christmas financial hangover rather than allowing it to linger for months afterwards.

“However, if you are going to borrow money to help spread the cost of Christmas then make sure you stick to your budget and have a clear plan about how you are going to repay the money you have borrowed.

“Short-term loans are not the only option available to consumers but used sensibly they offer many benefits over other forms of credit. For example, short-term loans account for just £1.20 of every £100 of problem debt, whereas credit cards and overdrafts account for more than 60 per cent of unmanageable debt.”