Debt Consolidation

5 Ways to Eliminate Holiday Debt

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The holidays may be behind us, but for many, the season left financial burden in its wake. For consumers who racked up holiday debt in 2017, the average total came in at $1,054—that’s a 5-percent uptick from the year before.

The numbers come from MagnifyMoney’s annual holiday debt survey, and they’re pretty telling. The takeaway here is that failing to budget for the holidays can seriously cripple your financial future. (Note: MagnifyMoney is a subsidiary of LendingTree.)

The good news? All hope is not lost. In the spirit of fresh beginnings, here are five expert-backed ways to kick your holiday debt as quickly as possible.

Table of Contents:

Option 1: Debt Consolidation Loans

This is exactly what the name implies—debt consolidation is a type of loan that allows you to put all your debts under one new umbrella. In the end, you’re left with one loan and one loan payment and, hopefully, a reduced interest rate, although that’s not guaranteed. Consolidation loans can take a variety of forms, including personal loans and home equity loans.

Once you receive the loan, you use it to pay off all your debts so that what you’re left with is one fresh balance. To be clear, consolidation doesn’t lower your debt. But Steve Repak, certified financial planner and author of “6-Week Money Challenge”, tells LendingTree you can definitely save money over the long haul if the interest on the new loan is lower than what you were paying before.

“I am generally not a huge fan of consolidation because, many times, people go back to using the same credit cards they just paid off,” he adds, underscoring just how important it is to have a plan before taking out this kind of loan.

If it simply shuffles your debt around, and you don’t change your spending behavior, it won’t do you any good.

Pros and cons of debt consolidation

The pros:

Easier to manage payments. In addition to streamlining all your debt, consolidation also leaves you with one clean monthly payment. That may make it easier for you to stay on top of your payments and less likely to miss one. Your payment history makes up a whopping 35 percent of your total credit score, so this can certainly work in your favor.

You can potentially save money on interest. If done right, a debt consolidation loan can help you save money and pay down your holiday debt faster.

Let’s say the holiday season left you with two new credit card balances: $800 on a store credit card with 25% APR, and another $400 balance on a regular credit card that has a 12% APR. For argument’s sake, let’s also assume you already had a medical credit card totaling another $500 at 6% APR. That’s a total of $1,700 in debt. In our scenario here, let’s put the minimum payment for each at $25, for a total payment of $75 a month across all three cards.

If you only make minimum payments on these three debts, it would take you 54 months to get debt free. The kicker? Thanks to all the interest that will accrue over that time, you’ll pay a grand total of $2,298 — the original $1,700 balance plus $598 in interest charges.

Now let’s imagine you take out a personal loan at 8% APR to consolidate all your debt.

When we plug in the numbers and assume a $75 monthly payment (which is the same as what you’d be shelling out if you didn’t consolidate), some pretty big savings pop up.

Overall, you’ll pay a total of $1,849 and be debt-free in just 25 months. That’s a $449 saving — plus the debt is eliminated in half the time.

Of course, snagging a lower interest rate is key here. Otherwise, it’s simply not worth it. If you have less-than-perfect credit, you’ll likely have a tougher time getting a good rate. (This is precisely why rehabbing a low score is so vital to your financial health.)

The cons:

You may hurt your credit by applying for consolidation loans. While it is important to compare several options when you’re looking for the best debt consolidation loan, applying for a bunch of loans all at once isn’t great for your credit. But, there is a way to avoid this. Request quotes from lenders who offer prequalification tools that use only soft credit pulls. That way, you can know going into the real application whether or not you’re likely to be approved.

When you actually do pull the trigger and apply for a loan, you might see a slight credit score ding since at that point you would have a hard inquiry in your credit report. The good news is that Benjamin Brandt, certified financial planner and host of the “Retirement Starts Today Radio” podcast, tells LendingTree that the damage is often nominal and most people rebound within a few months.

You may not solve the underlying issues. One other word of wisdom: Consolidation loans are only effective if you stick to your repayment plan and commit yourself to changing your spending habits. If it’s more of a Band-Aid that keeps your debt in a holding pattern, you’ll never make any real headway.

“Debt consolidation doesn’t solve the problem of us going over budget,” said Brandt, alluding to the importance of tackling the root of the problem. “It’s sort of medicating the symptoms, not necessarily the illness.”

If your consolidation loan takes the form of a home equity loan, things get even hairier since you’re using the property as collateral. If you default on your payments, you could end up losing your home.

Option 2: Balance Transfer Credit Cards

If you’re currently being crushed by high-interest credit card debt, it’s time to perk up. You may be able to press pause on the interest altogether if you can find a good 0% promo APR balance transfer offer.

You’ve likely seen offers for balance transfers before, and maybe even dismissed them as marketing gimmicks. But if you come at them the right way, balance transfer credit cards actually represent a powerful debt payoff strategy.

When you complete a balance transfer, you transfer balances from existing credit cards onto one new credit card and focus on paying off that one card instead.

Pros and cons of balance transfers


Potentially pay no interest for a period of time. The idea is to secure a new credit card that boasts a 0% promo intro APR for balance transfers. Similar to a debt consolidation loan, you then use the new card to pay off all your old balances. The result? A new, interest-free balance. From there, it’s all about hitting that balance as hard as you can.

“Just make sure you read the fine print, understand the balance transfer fees, and see what the rate goes up to after that introductory teaser rate expires,” said Repak.

Zero-percent promotional offers vary by credit card but can last anywhere from 12 to 21 months.

Balance transfer fees currently range from 0 to 4% but can sometimes be higher. However, you may save so much on your reduced interest payments that it’s totally worth the fee.

Still, if you crunch your debt numbers and it makes sense, balance transfers are a viable way to quickly get yourself out from under holiday debt. Again, it goes without saying that the better your credit score, the better offers you’ll be able to get.


The 0% promotional period may end before you’re finished paying off the balance. If you’re already struggling to make ends meet or are routinely accruing new debt, paying off a balance transfer card before the promotional period ends may simply not be realistic — especially if you get hit with a high-interest rate once it’s over.

You may be tempted to rack up new charges. While tempting, it’s crucial not to add new charges to a balance transfer card even though you’re enjoying a 0% promo APR — unless you can pay it off in full before the interest kicks in.

“If you’re juggling between 0 percent APRs and introductory trial periods with credit cards, that’s fine, but you need to have a strategy to eliminate debt in the short term and long term,” added Brandt. “Otherwise, you’re just kicking the can down the road.”

In fact, some balance transfer cards don’t even extend that 0% promo APR to new purchases, so be sure to read the fine print before you start swiping.

Another detail worth mentioning is that you probably can’t transfer balances to a card with the same bank. Translation: transferring debt from a credit card with one bank to a new card at the same bank, even if they have a great balance transfer offer, may be off the table.

Option 3: The DIY approach with a debt snowball or debt avalanche

Debt snowball

When it comes to taking a do-it-yourself approach to debt repayment, there are two main schools of thought. Both require you to make the minimum payments across all your accounts except for one balance, which you accelerate.

The aptly named “snowball method” has you accelerate your smallest debt first, throwing all your disposable income at it until that balance is paid off. From there, you continue onto your next lowest balance, adding in your now freed-up monthly payment from the account you just closed, repeating the process until you’re debt-free. The key to the success of this method is that you are slowly building momentum, which will help you stay motivated.

“That motivation factor, I think, will help you get out of debt quicker because you get those frequent ‘atta boys,’ as I call them — the dopamine hits that come with paying off a loan,” said Brandt.

His sentiment is echoed by research published in the Journal of Consumer Research suggests that we ultimately measure our progress by how significantly we can reduce individual balances.

Debt avalanche

The biggest downside to the snowball method, however, is that prioritizing debts by balance rather than by interest rate could cost you lots of money in interest fees.  Enter the debt avalanche approach. This method has you prioritize high-interest balances above all else. It’s otherwise identical to the snowball.

Repak, who once had $32,000 of credit card debt, eliminated all of it using the avalanche. He argues that the debt avalanche method got him debt-free faster than if he’d done the snowball — because he was focusing on paying off high-interest debts first, he was giving those interest charges less time to accumulate, which would have made it harder to make progress. It also cost him less in the long run.

“If you’re someone who needs those boosts of encouragement because that’s the way you’re wired, there’s nothing wrong with that,” he said of the snowball method, acknowledging that at the end of the day, it really comes down to choosing a method you’ll stick with until the end.

“But if you’re not concerned with winning those little battles, it’s in your financial best interest to concentrate on the debt that’s charging you the highest interest.”

Let’s go back to the debt we mentioned above:

  • $800 on a store credit card with 25% APR and a $25 minimum payment
  • $400 on another credit card with 12% APR and a $25 minimum payment
  • $500 of medical debt with 6% APR and a $25 minimum payment

You’d pay $135 less and get out of debt two months faster if you go with the avalanche. These numbers, of course, may vary wildly depending on your debt. In the end, it’s about selecting the debt payoff plan that works best for you.

Option 4: Add an additional income stream

Stephanie Jenkins, a 34-year-old realtor in Palm Beach Gardens, Fla., got creative with her income while struggling to pay for her 2009 wedding. She had about $5,000 in credit card debt that was making it particularly challenging.

At the time she was 25, working as a full-time professional development trainer at a local university. She decided to bring in extra money to help pay down her debt, and picked up an interesting side gig — driving a golf cart at a nearby course.

“I worked for about two years, only on Saturdays, and made $100 to $125 a day,” Jenkins told  LendingTree. “I saved up roughly $10,000, which I used to pay off my credit card and help cover some of the wedding costs.”

Jenkins represents a growing trend — 9-to-5’ers picking up side gigs to pull themselves out of debt faster. It turns out that nearly one-third of workers in the U.S. are also active side hustlers, according to CareerBuilder.

“If your schedule allows, I love the idea of side gigs,” added Brandt. “When it comes to paying down debt, the more money you can throw at it, the better your chances of success.”

Whether it’s driving for Uber, babysitting, or dog walking, just do the math first to make sure it makes financial sense. After taxes (yes, you may have to pay taxes on side income), putting in 10 hours a week at minimum wage may not be worth the time and effort.

One other tip: If possible, funnel all cash windfalls — from tax refunds to raises — toward your debt.

Option 5: Sell some of your stuff

We all know what they say about one man’s trash. It turns out the old adage holds true for those looking to offload unwanted stuff for cash. eBay has roughly 168 million active users, a number that’s been steadily climbing since 2010, according to Statista.

Repak, who has personal experience selling unwanted stuff, says there’s no shortage of online sites to hawk your goods. While Craigslist and eBay are probably top of mind, they certainly don’t stand alone. Getting rid of clothing and accessories? Check out Poshmark and thredUP; for electronics, Decluttr has a loyal following.

Taking the digital route isn’t the only way to go. You could always host an old-school garage sale. In the U.S., the method brings in over $4 million in weekly revenue, according to the Statistic Brain Research Institute.

This brings us to what you should actually sell. To avoid becoming overwhelmed, Repak recommends taking baby steps.

“Pick one room to start with, and if that room has a closet, that’s extra points,” he said.

From there, Repak suggests dividing items into four categories: sell, donate, throw away, or keep.

Tip: If you haven’t worn it, played with it, or touched it in over 18 months, you likely don’t need to keep it.

So which option is best to eliminate debt?

For many, getting out from under holiday debt often requires a combination of strategies. According to Brandt, this might include, say, simultaneously tackling a 0-percent balance transfer and your lowest balance, if your budget allows. You can also switch gears by alternating between the avalanche and snowball methods to best suit your needs.

If the numbers make sense, a debt consolidation loan can potentially save you money on interest while cutting your repayment time in the process. The same goes for balance transfers — so long as you pay down the balance before the promotional period expires.

Similarly, taking a DIY approach can be a viable option for those who stay the course and prioritize their debt. And, of course, upping your income by way of side gigs and/or selling unwanted stuff can only help you reach your goal faster.

How to avoid holiday debt in the future

Consolidating holiday debt through a loan or balance transfer, without any real plan, is merely shuffling debt around. There’s no muscle behind it. Similarly, paying the minimum payments across all your accounts and calling it quits will keep you in the debt cycle for way longer than you need to be. The same goes for those who continue to charge up new debt on a regular basis.

The only way to break the cycle is to create— and stick to — a realistic, manageable budget. Brandt suggests tracking your spending for a month or so to get an accurate idea of how you’re currently spending your money.

After all your bills are accounted for, how much money is left each month? Are there any areas where you can reduce your expenses or trim your spending?

From there, use any disposable income to build up a small emergency fund of about $500, which should cushion the blow of an unexpected pop-up expense.

“After that, to prevent running into the same problems you ran into this year, make a holiday spending budget,” he said. “If your budget is, say, $600, start putting $50 aside every month in an envelope so that when Christmas rolls around, you’ll be ready.”


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