Paying off debts with your vacation pay is often a good idea, but not always practical. If you are going on a nice vacation this year or if you have a home renovation, you can often use this money hard. On the other hand, paying off your outstanding debts gives you more room for extra spending the rest of the year.
Because you no longer have to pay off monthly and you no longer have to pay that much interest. But it doesn’t necessarily have to be one or the other. For example, you can save a portion for your vacation and pay off your debt a bit with another portion.
Pay off debts with holiday pay
Suppose you have a revolving credit of 10,000 euros of which you have already withdrawn 8,000 euros. If you now repay an extra part of this revolving credit, you will always have the option to withdraw the repaid amount if the need is there. That is the advantage of a revolving credit.
With this extra repayment you will immediately start paying less interest per month because the outstanding amount goes down, but the money remains at your disposal.
Borrow money for vacation
On the other hand, it can of course also be that your holiday pay is not at all sufficient to pay for the fun trip, then paying off your debts with holiday pay will of course not end up and you should rather look for a possible mini loan for the holiday.
There have been several reports in the press that the net holiday pay this year is less than the year before, because more tax has to be paid on it. If you want to request a mini loan, this can be up to a maximum of 1500 euros, but any amount below that is also possible, popular is a mini loan of 500 euros.
Which debts do I have to pay off?
If you have decided that you want to pay off some debts with your holiday pay then it is of course the best thing to look at which debt has the most interest. Often that is a loan that you have taken out with a car dealer when buying a car.
But also an outstanding debt with your credit card or an outstanding account of a mail order company are often debts where a lot of interest is charged. It is therefore advisable to be the first to pay off this type of debt. What you can save on anyway is to transfer your current loans to a new loan with a lower interest rate.