How Do I Pay Off Credit Card Debt With A Personal Loan
Paying off credit card debt outright is usually the smartest financial strategy. Yet, if youre in so much credit card debt that you cant afford to simply write a big check and the debt avalanche method seems too overwhelming or slow to manage, it might be time to consider an alternative approach.
In situations where you have several different cards , paying them off with a low-rate personal loan can be a good idea.
- Step 1: Do some research into different loan providers , and find out the rates youre likely to get and the fees involved. If youll get a lower rate than youre paying now, and youll pay less in fees, a consolidation loan could be a good idea.
- Step 2: Apply for a personal loan from your provider of choice. You may have to submit credit card information so the loan provider can pay your card issuers directly. In some cases theyll transfer the money to your bank account, and then you need to pay off your cards yourself.
- Step 3: Pay off the personal loan according to its terms. If you can pay more than the required amount each month, thatll get you out of debt faster and save you money.
The benefits of this route include:
That being said, taking out a loan to pay off credit card debt can also be dangerous. Follow the terms of the loan carefully, or you could just make your situation worse. Avoid this route if you dont trust yourself to use credit responsibly. Otherwise, you could end up further in debt.
If you use this strategy, remember these key points:
Problem Debt Vs Managed Debt
If your total debts add up to more than you earn in a year, if you dont quite know where or why you have these debts, or if youre struggling to repay them then you may well have problem debt.
If you have debts that you pay off each month, that do not exceed your yearly earnings and that you can categorically state to what they relate, then you probably have managed debt.
But bear in mind if you ever start spending more than you earn and using credit cards or loans to fill the gap then your managed debt could quite quickly get out of control.
Think of it like a beautifully kept garden: with regular weeding, watering and maintenance itll remain pretty but after a few weeks or months of neglect itll become overgrown and wild.
In this guide, well take a look at a range of tips to keep your debt under control. If you are facing problem debt then skip to the how to tackle serious debt problems section for some of the actions you need to take.
Tips are in order of things that might be easier to tackle first.
Get Help If Youre In Hardship
If you need to pay for certain important costs and are claiming some benefits such as income support or pension credit you might be eligible for a budgeting loan.
This will be small only up to £812 and will be paid back as a deduction from your benefits.
You may also be able to get support from your local council. Use the search engine provided by charity Lasa to see whats available in your postcode area.
Find out more: theres a helpful list of financial support you may be able to get from this government website.
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How Do I Pay Off Debt With Debt Settlement
Debt settlement is another option you can consider when youre ready to eliminate your credit card debt. This strategy usually works best for people who are already past-due on their credit card payments and can afford to make large, one-time settlement payments to their creditors.
You can settle debts on your own or you can hire a professional debt settlement company to handle the process for you. If you choose to hire an outside party, you should do extensive research to avoid scammers and exorbitant fees. Be aware that hiring a company to do this is not necessary, and could end up costing you a lot more money. Learn what to watch out for at the FTC Consumer Information website.
- Step 1: Examine your debts, and determine your ability to repay them over time.
- Step 2: If you think your debts are insurmountable, and youve decided bankruptcy isnt the right response, you can either attempt debt settlement yourself or hire a company. The worse your situation the more leverage you might have, because your creditors will see that theyre less likely to be paid in full.
If you go the DIY route:
Or, if you prefer to work with a debt settlement company:
This option usually only becomes available after its become clear that youve been struggling to pay your bills, like if youve started to accrue late payments or havent been paying at all.
What Can I Do
If you have higher interest credit cards, start by shopping around for a better deal. Compare rates online, or contact your credit union or bank directly to ask about lower interest credit card options. Dont be swayed by sexy intro rates or cash rewards focus on getting a low rate without strings attached.
In the meantime, look at your budget and see where you can trim from entertainment, clothing or other optional categories. Put as much as possible toward your existing credit card debt. Even if you only have an extra $10 or $20 a month to put toward your credit card bill, youll get to a zero balance that much faster.
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Consider A Low Rate Balance Transfer
Many financial institutions offer a balance transfer card that starts with a low introductory rate for a specific period of time.
A balance transfer card that offers a 0% promo rate on your credit card debt for 12 months can save you thousands of dollars in interest, particularly if you pay down as much of the principal as you can during this interest-free period.
Balance transfer cards often come with a transfer fee of 1% to 5% of your balance. Read the fine print to know what the fees are and for how long the low rate is available.
Examples of balance transfer cards in the U.S. include:
- Discover It Balance Transfer Card
- BankAmericard Credit Card
Create Additional Streams Of Income
Pick up a side hustle or find another job so you can increase your income and put more money towards paying down your debt.
Side gig options for raising extra cash include:
» Blogging: There is really no limit to how much you can earn with blogging it is up to you! Want to earn $2,000 in passive income every month? Check out this 6-step guide on how to start a profitable blog.
» Become a Proofreader: Make a 5-figure income proofreading from the comfort of your home.
»Teach English online: Sign up with VIPKid.
For other work-from-home jobs that pay well, check out this article.
You can also generate an additional $50 to $200 per month taking online surveys. A few examples of legitimate online paid surveys I have used to raise extra cash include:
- Swagbucks: They have paid their members over $500 million to date. to receive a $5 welcome bonus.
- Pinecone Research: Earn $3 to $5 per survey completed. Join Pinecone.
- Daily Rewards: It also offers a $5 sign-up bonus.
- LifePoints: Get paid to take surveys and start with 10 free points. .
When you get a salary raise or bonus, cash gift, or tax refund, consider using this windfall to pay off debt.
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Why Earning More Works
Personally, I knew I was never going to get out of debt just by cutting spendingunless, perhaps, I lived with my parents until 35. I simply didnt earn enough money. I had to earn more.
So I did several things: I got a second job , I looked for higher-paying day jobs and moved , and I started this blog. Between the second job, a career change, and starting this blog, I added $15,000 to my annual income.
And in about four years, I went from earning just over $30,000 to making over six figures.
I do not say this to brag or to claim that Im anything special. I say it only to make a point. If you put your mind to it, you can get out of debt, you can increase your income, and you can get a better job. If you put your mind to it, you can start a part-time business.
Not everybody has to earn more money to get out of debt, but it makes it a lot easier.
There are literally endless ways to earn extra money, but all could fall into these three categories.
Switch Your Insurance To Cut Your Costs
Remaining loyal to any one insurer year after year will only hurt your pocket. Insurance deals, whether it be for your home, car or annual travel policies will be better for new customers.
So you should make sure youre not unnecessarily increasing your outgoings by spending more than you need on insurance. A few weeks before your policy comes up for renewal, look around for the best deal that works for you.
Find out more:best and worst insurance whatever youre looking to insure we explain how to find the best deals.
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Join Freecycle For Free Furniture And Homeware
If you need furniture or homeware but cant afford it in your current budget then you may still be able to get it for free.
Websites like Freecycle or Freegle have searchable recycling communities where people post Offered and Wanted adverts. While most will require you to collect, it can be a great place to pick up anything from armchairs to washing machines.
Find out more: Visit Freecycle and Freegle for expected etiquette and to start your search.
Cut Existing Loan Costs
It may be possible to swap your personal loan to a provider that charges a lower rate of interest although youll need to crunch the numbers to see if its worth it.
Youll have to call your existing lender and ask it for a settlement figure which will be the total of the debt still owed plus a settlement charge for paying it off early.
Youll then need to compare this figure to the interest rate on the best new loan you may be able to get, and see if the saving stacks up.
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The Fastest Way To Pay Off $10000 In Credit Card Debt
Editorial Note: The content of this article is based on the authors opinions and recommendations alone. It may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.
Digging out of thousands of dollars of credit card debt can feel frustrating, intimidating and ultimately impossible. Fortunately, it doesnt have to be any of those things if you learn how to take control.
Paying down debt is not only about finding the right financial tools, but also the right psychological ones.
To start, you need to understand why you racked up credit card debt in the first place. Perhaps it was a medical emergency or a home repair that needed to be taken care of immediately. Maybe youd already drained your emergency fund on one piece of bad luck when misfortune struck again. Or maybe youre struggling with a compulsive shopping problem, so paying down debt will likely result in you accumulating more until the addiction is addressed.
You also need to understand what debt payoff strategy will motivate you to succeed. Do you want to pay down your credit card debt in the absolute fastest amount of time possible that will save you the most money or do you want to make small wins along the way to keep yourself motivated?Here are a couple strategies to consider as you learn the best way to handle credit card debt and pay it off quickly.
Explore Credit Union Personal Loans
There are over 500 credit unions in Britain, so almost everyone has access to one.
Loans from credit unions are generally cheaper than loans from most other providers for smaller amounts and do not incur set-up fees, administration costs or early redemption fees.
Many credit union loans, for example, cost 1% a month on the reducing balance of a loan .
Find out more:
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I Got Freelancing Gigs Online
If you know your way around a computer, chances are you can earn a few extra bucks providing a service online. At the most tedious level, services like will pay you for transcribing audio, categorizing images, and other mundane tasks. If you have a talent, such as mastery of multiple languages, you might earn more for translating. I did this for a couple of weeksand earned probably $100 .
Moving up the pay ladder, is renowned among web workers for being a reliable source for people who do small tasks well. The gist is you offer to sell a service for $5. The services on Fiverr range from the useful to the wacky . Although initial tasks sell for $5, Fiverr gives you the opportunity to earn more by selling upgrades, such as a premium price for expedited delivery or additional services.
Upwork is the leading marketplace that connects digital freelance workers and clients around the world, from writers to coders to virtual assistants. Unless you have a very specific , landing your first few gigs is a competitive process.
I was able to land some writing gigs on Upwork back in the day but I had to accept slave wages to win projects.
If youre already working with a few clients, ask them to run their next project through Upwork so you can begin collecting feedback, which will make you more attractive to future clients. .
Pay Off Your Debt Without Hurting Your Credit Score
When it comes to personal finance, there are few topics that are discussed more often than credit scores. It doesnt seem like a simple three-digit number would have that much impact on how you manage your money, but your score shapes whether youre able to make a big purchase or qualify for the best rates on loans.
Carrying around a boatload of debt doesnt do much to improve your score, but the way you pay it off could also have an adverse affect. If youre trying to dig your way out from under high-interest credit cards, student loans or a car loan, taking steps to protect your credit score in the process is vital.
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Pay More Than Once A Month
Pay your credit card bills more than the required once per month. This may make it easier to stay on track of how much you owe. Paying your credit card bill regularly may also lower your balance/utilization ratio. The credit utilization ratio is the percentage of your total available credit that is currently being used. The utilization ratio is one of the components used by credit reporting agencies to calculate your credit score.
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Consider A Debt Consolidation Loan
A debt consolidation loan is a type of personal loan that can help you consolidate multiple lines of high-interest debt into a single loan. Debt consolidation loans also come with a perk: If you make the monthly payments in full and on time, your credit score could see a positive impact.
The main perk of a debt consolidation loan is that it tends to carry lower interest rates than credit cards, so if you meet the qualifications, you may be able to save money on your credit card debt.
Budget For Debt Repayment
You have developed a plan in Step 2 for paying off your debts. Now you just need to make sure that you have the funds available to pay down debt every month.
Prepare a budget that includes your income and expenses, and allocate a specific amount of money for debt repayment. Some useful budgeting apps include:
Canada Mint, YNAB, KOHO, and STACK.
U.S. PocketSmith, Mint, and YNAB.
Making just the minimum payment does not work.
Going back to the debt list we used as an example in Step 2, if you only make the minimum monthly payments of $160 on your $8,000 Credit Card A balance, it will take you 137 months to pay off your debt!!
Yes, thats a whopping 11 years and 5 months to pay off your initial $8,000 credit card debt. In this time frame, you would also have paid $13,884 in interest payments!
If instead, you added $140 to your minimum monthly payment and put down $300 every month , you would pay off the debt in 37 months and your interest payments fall to $3,083. Thats over $10,000 in interest savings!
You can play around with this calculator here to see how fast you can pay off your debt.
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