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How to pay off your holiday debt

Don't let 12 days of Christmas spending turn into a 12-month debt hangover.

If you overspent on presents this year, a balance transfer credit card or a consolidation loan can help you manage your credit card debt — but watch out for interest rates that are far from jolly.

What options do I have to consolidate holiday debt?

You have two main options: a debt consolidation loan or a balance transfer credit card.

  • Debt consolidation personal loan. These loans are unsecured and allow you to bring a number of debts into one account so that you only have one monthly payment to keep track of. By consolidating separate credit accounts you may be able to reduce interest and fees.
  • Balance transfer credit card. If you have debt across one or more cards, you can consolidate your debt to a balance transfer credit card. Some cards offer 0% interest for an introductory period, but if you can’t pay your debt off before that time is up you could end up with a high rate. You’ll also need to keep an eye on balance transfer fees and annual fees.
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Debt consolidation loan vs balance transfer credit card

Which debt consolidation option is right for me?

The best option for you depends on a number of factors, including how much debt you’ve accrued and how long it will take you to pay it off:

Consider a debt consolidation loan if…

  • You have a large amount of debt.
  • You need more than a year to pay off your debt.
  • You’re credit score isn’t excellent.

Consider a balance transfer credit card if…

  • You have a relatively small amount of debt.
  • You can pay it off relatively quickly (one year or less).
  • You have good to excellent credit.

Check out our short video where we give you the rundown on how you can pay off your Christmas debt without breaking the bank.

How to choose a balance transfer credit card

There are a number of features to look for when choosing a balance transfer credit card:

  • Balance transfer interest rate. This is the promotional rate that will be applied to the debt that you transfer. Most cards offer a 0% APR rate, but you might not qualify if you have bad credit. If your credit score is low, you may still qualify for a card with a low introductory rate.
  • Balance transfer promotional period. How long will this promotional rate apply? These periods can be between 3 and 24 months. The interest rate on the card will likely spike pretty high when the introductory period is over, so you want to make sure you can pay your balance in full before then.
  • Standard rate. This is the rate that will apply to your balance after the promotional period ends. If you don’t pay your balance in full in time, can you still afford the card?
  • Fees. Check whether a balance transfer fee applies and whether you’ll need to pay an annual fee for the card.
  • Balance transfer limits and restrictions. Confirm how much you’re able to transfer. For some cards, you can’t transfer a debt that will be more than 80% or more of your credit limit. You’ll also likely need to make the balance transfer at the time of application in order to take advantage of the promotional rate. Make sure you’re familiar with all restrictions so you don’t get any nasty surprises when you apply.

Transfer your existing credit card balances

How to choose a debt consolidation loan

When you compare options for debt consolidation personal loans, check the following:

  • Interest rate. First, check whether the rate is variable or fixed. Variable rates may change over your loan term while fixed rates remain, well, fixed. Fixed rates are preferable, but variable rates are common.
  • Fees. What fees will you be charged? Check for upfront fees such as establishment or application fees as well as ongoing fees such as annual or monthly fees.
  • Loan limits. How much are you able to borrow and will it be sufficient to consolidate your debt?
  • Loan purpose. Not all lenders allow you to use their personal loans for debt consolidation, even if they are unsecured. Make sure you’re able to use it for what you need before you apply.
  • Loan terms. Check the terms of the loan and use our consolidation loan calculator to find out what your monthly payments will be.
  • Repayment flexibility. Are you able to make extra repayments throughout the loan or pay it off early without penalty? Look for early repayment penalties or restrictions.

Compare debt consolidation loans

Compare debt consolidation loans

Select your credit score range and state of residence to see the top providers in your area. Then explore your options by APR, minimum credit score or loan amount. Choose the Go to site button for more information about a particular provider.

1 - 7 of 7
Name Product Filter Values APR Min. Credit Score Loan Amount
Credible personal loans
3.99% to 35.99%
Fair to excellent credit
$600 to $100,000
Get personalized rates in minutes and then choose an offer from a selection of top online lenders.
Best Egg personal loans
7.99% to 35.99%
640
$2,000 to $50,000
A prime online lending platform with multiple repayment methods.
Upstart personal loans
5.6% to 35.99%
300
$1,000 to $50,000
This service looks beyond your credit score to get you a competitive-rate personal loan.
SoFi personal loans
7.99% to 23.43%
680
$5,000 to $100,000
A highly-rated lender with competitive rates, high loan amounts and no fees.
Upgrade personal loans
7.46% to 35.97%
600
$1,000 to $50,000
Affordable loans with two simple repayment terms and no prepayment penalties.
Happy Money
6% to 16.49%
640
$5,000 to $40,000
Pay down your debt with a fixed APR and predictable monthly payments.
Monevo personal loans
1.99% to 35.99%
None
$500 to $100,000
Quickly compare multiple online lenders with competitive rates depending on your credit.
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7 ways to give during the holidays without breaking the bank

  1. Make thoughtful, homemade gifts for those close to you. Use your talents or hobbies to give something your friends and family will actually appreciate. Even something as small as baking a friend’s favorite cookies can mean a lot.
  2. Give small gifts to more people than you normally would. Think of the people you regularly interact with and consider giving them something small, too. This could include coworkers, that barista you banter with every morning or anyone else you feel use a little something extra this winter.
  3. Up your tips. The holiday season is a truly stressful time if you work in the service industry. One easy way to give back is to tip more than you usually would. It’s a small way to brighten someone’s day.
  4. Host a holiday potluck. Throwing together a full holiday spread while also working full time can be one of the most stressful parts of the holiday season if you’re the designated host. If you don’t regularly host holiday dinners, consider volunteering to have a potluck at your place instead.
  5. Sign up for monthly donations. Rather than making a large, bank-breaking donation to a cause or charity, consider signing up for a year or even a few months of recurring donations. Charities often prefer small, recurring donations because they provide consistent cash flow throughout the year.
  6. Volunteer your skills. Volunteering can be a great way to give back without spending any money. Think of what skills you have to offer and look for opportunities where you can make a real difference.
  7. Be there for your friends and family. For those of you who love the holidays, it may be hard to understand that this time of year is actually the most difficult for some people. Sometimes the best gift you can give is just being there for someone. Reach out to anyone who you think might feel particularly alone this time of year.

Remember that giving isn’t just about spending money

At its best, gift giving is a way to spread love and kindness to the people in your life. When you approach holiday gifts with that in mind, it becomes clear that spending a lot doesn’t really have much to do with giving. Pay attention to what your loved ones actually want and how you can make their lives a little bit easier this December. Who knows, you might actually end up saving while strengthening your relationships in the process.

Other ways to manage your holiday debt

While debt consolidation loans and balance transfer credit cards are the two primary routes to conquering your Christmas debt, there are some other things you can do to prevent future debt from accumulating:

  • Make a budget (and stick to it). Having a budget can help you figure out how to best spend your money — and to prevent you from overspending. Tracking your spending and understanding how much you need to pay off your debts can help you figure out where to cut spending — empowering you to cut back in order to climb out of debt.
  • Save every month. The more money you save every month, the quicker and easier it will be to pay off your debt. Any extra money you’re saving should either go towards paying off your debts — prioritizing those with higher interest first — or setting up an emergency fund. A good number to aim for every month is $1,000 — but don’t worry if you can’t save that much! Every cent counts.
  • Snowball your debt. Using the debt snowball method involves paying off your smallest debts first then your larger debts. After making the minimum payments on all of your debts, use any money left over to pay extra towards your smallest debt. Not only does it make paying off your debt less daunting, but you’ll be erasing it much faster.

Bottom line

A little planning can go a long way when it comes to Christmas spending. Put a plan in place, and if you need a Christmas credit card make sure you carefully consider all of your options. This way you can enjoy, rather than worry about, the holiday season.

However, if you find your credit score on the naughty list, you may want explore debt consolidation options for bad credit.

Frequently asked questions

I was approved for a balance transfer card, but the limit isn’t high enough to cover my debts. What can I do?

You can either take out the balance transfer card and move as much debt as you can onto it or decline to open the card.

If you choose to open the card you’ll need to work out a budget to see how much you can pay off in the promotional period while still maintaining your other credit card/s. After you’ve paid that off you can choose to try for another balance transfer or just keep paying down your remaining debt.

If you choose to decline the card, remember when you apply for another balance transfer the card provider will be able to see your recent application and it might affect your chances of approval.

What happens if I don’t pay off my debt during the promotional period on my card?

First, work out how much debt you have left on the card and how long it will take you to pay off while you’re being charged the new, higher rate. If it’ll be unmanageable or you’ll be in debt for an extended period of time, you may want to consider another balance transfer.

Keep in mind that continually balance transferring your debt isn’t an ideal strategy because every new credit application is listed on your credit file and affects your credit score.

How long does it take to complete a balance transfer?

Most balance transfers will be processed 7 to 10 days after you’re approved for the card, though this can vary among providers.

Picture: Shutterstock

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