The holiday season has come and gone, and now you may find yourself in more debt than you were before.

Unfortunately, anything you borrowed must now be repaid, but with interest. When you charge holiday debt on a credit card with an average APR close to 20 percent, paying down the principal of your balance isn’t easy.

But there’s a possible solution: with careful planning and effective budgeting, you can consolidate your balances to streamline the repayment process.

Options for consolidating holiday debt

One smart strategy is to consolidate debt into a new loan with better terms. Most debt consolidation options can help you secure a lower interest rate, meaning you can pay a lower monthly payment each month and pay down debt faster. These debt consolidation options may help you pay off holiday debt faster.

Debt consolidation with a personal loan

Debt consolidation loans are personal loans that offer a fixed interest rate. You can combine holiday debt from other credit cards or personal loans you may have taken out into a new debt consolidation loan. Instead of paying several creditors each month, you’ll make one monthly payment over a fixed period – typically between three and five years.

Loan rates range from about 10.3 percent to 32 percent. Be mindful that the lowest interest rates are reserved for borrowers with higher credit scores. Still, debt consolidation loans are an affordable option if you have good or excellent credit.

These loan products are unsecured, so you won’t need collateral to get approved. You can find debt consolidation loans through most traditional banks, credit unions and online lenders.


  • Debt consolidation loans are easy to shop for and compare online. Some even let you get prequalified without a hard inquiry on your credit report.
  • These loans often come with competitive interest rates and minimal fees, which means you can save a bundle in interest.
  • These loans offer a range of repayment terms, so you can find one that matches your needs.


  • If you have bad credit, you will likely pay a higher interest rate.
  • Some personal loans come with origination fees that can equal up to 6 percent of your loan amount upfront.

Balance transfer credit card

A balance transfer credit card is another way to dig your way out of holiday debt faster. Balance transfer credit cards offer 0 percent APR on transferred balances for up to 21 months, although some do charge a 3 or 5 percent balance transfer fee for the privilege.

If you’re approved for one of these cards, you can move the balances from your high interest rate credit cards to the new card, assuming you have a big enough credit limit. The idea is to pay off the amount you move over before the promotional interest period ends. Otherwise, you’ll pay interest on the remaining balance.

Balance transfer credit cards are offered by most major credit card issuers and select banks and credit unions.


  • Paying down debt at 0 percent APR will help you chip away at the principle of your balance significantly faster.
  • Most 0 percent APR credit cards don’t charge an annual fee.
  • Many introductory offers last for 18 or 21 months, which could be enough time for you to pay off your debt entirely.


  • Once your card’s introductory offer is over, your interest rate will reset to the standard variable rate.
  • Some cards charge a 3 to 5 percent balance transfer fee upfront.
  • You could get a penalty APR if you fall behind on payments.

Home equity loan or HELOC

If you have enough equity in your home, you can also borrow against your home’s value to consolidate holiday debt.

Home equity loans act as a second mortgage and allow you to convert some of your equity to cash Most lenders let you borrow between 75- and 85-percent of your home’s equity, or the difference between what your home is worth and what you owe on the mortgage and any other outstanding loans on the property. So, if your home is worth $425,000 and you owe $275,000 on the mortgage, you could qualify for a home equity loan between $43,750 and $86,250.

However, you can also opt for a home equity line of credit, or HELOC, which is a line of credit you can borrow against.  You’ll make interest-only payments on the amount you borrow during what’s known as the draw period. It usually spans 10 years, and any amount you still owe once the draw period ends becomes a loan, payable in monthly installments over a set period. But the payments will likely fluctuate since HELOCs come with a variable interest rate.

Both home equity loans and HELOCs are offered by traditional banks, credit unions and online lenders. But consider using this option as a last resort to consolidate holiday debt since you could lose your home if you default on the payments.



  • Home equity loan products can come with pricey fees and closing costs similar to a home mortgage.
  • You’re using your home as collateral, meaning you could lose your property to foreclosure if you don’t repay your loan.

Borrow from your 401(k)

A 401(k) loan lets you borrow against your retirement savings, only to have your loan repaid through regular payroll deductions. You won’t have to fill out a lengthy loan application, submit loads of paperwork or undergo a credit check to get approved for a loan. Plus, you can use the loan proceeds to consolidate holiday debt or however else you see fit.

However, if you leave your job before the loan is paid off, there could be serious tax consequences. Contact your plan administrator to inquire about taking a loan from your 401(k) and learn if it’s allowable.


  • You can borrow money from yourself instead of a bank or another lender.
  • You don’t have to rack up any more unsecured debt.


  • 401(k) loans are subject to limits, and you can typically only borrow up to 50 percent of your vested account balance.
  • If you leave your job, you may be required to repay your loan by the end of the tax year in order to avoid default and penalties.
  • Not all 401(k) plans allow loans, so make sure to check with your plan administrator.
  • When you borrow from your 401(k), you’re removing money that can be growing tax-free. The less money in your account, the less money that has the opportunity to grow over time.

Sign up for a debt management plan

Some credit counseling agencies offer debt management plans that can help you get back on track. But first, you’ll receive an hour of complimentary credit counseling to determine if a debt management plan is a good fit or if there are other more suitable options.

These plans require you to deposit money into an escrow account each month, which the agency you’re working with uses to pay credit card bills and other unsecured debts you owe. The credit counseling agency will also try to negotiate concessions, like lower interest rates and fee waivers, on your behalf, which can help you pay less in interest and get out of debt faster.

However, the downside is creditors that agree to the plan could close your accounts until all the balances are paid in full. And if you default on the payments, you could be removed from the debt management plan and lose creditor concessions.

Before you sign up, understand that not all credit counseling agencies are reputable. So, you want to do your research to find an agency that’s experienced, has a solid track record and operates as a non-profit. Once you have a shortlist of options, reach out to your state attorney general and local consumer protection agency to see if past clients have filed complaints. You can also refer to the Better Business Bureau’s website to view the agency’s accreditation status and rating.


  • Working with a credit counselor may help you stay disciplined while you pay off holiday debt.
  • Having a third party negotiate interest rates on your behalf can help if you’re overwhelmed by the process.
  • Credit counseling agencies pay your bills on your behalf when you’re in a debt management plan, leaving you with only one monthly payment to make each month.


  • Debt management plans typically are not free. You’ll usually pay $50 or more per month for the help you receive.
  • You’ll need to be aware of debt management and debt settlement scams since many shady companies operate in this space. Make sure companies you’re considering don’t charge any upfront fees for their help.

Borrow money from friends and family

A loan from a relative or friend is likely the most cost-efficient option to pay off holiday debt. Depending on your relationship, they may be willing to extend an interest-free loan to you or charge you a nominal rate to borrow funds. It’s also ideal if you have less than perfect credit and would have trouble qualifying for a loan or balance transfer credit card with competitive terms.

That said, there’s a downside to this option. The relationship could suffer if you fail to make timely payments, or worse, repay anything at all. So, it’s vital to come to a fair agreement that works for both parties, get it in writing and uphold your end of the bargain to avoid discord.


  • You could get an interest-free or low-cost personal loan.
  • A lower credit score won’t keep you from borrowing the funds you need.


  • You could ruin a valuable relationship with a friend or family member.
  • If you’re looking to rebuild your credit health, this form of loan won’t help since payment activity isn’t reported to the credit bureaus.

The bottom line

Racking up holiday debt is easy, but paying it off can take months or even years. If you have too much debt to handle, consolidating debt at a lower interest rate can help you pay less interest over time and pay off debt faster.

Just remember that none of the debt consolidation methods on this list will work if you keep using credit cards and adding to the pile. To get out of debt — and stay out — create a plan to pay it off and stop using your credit cards until you’re debt-free.