(This post contains affiliate links.)
Have you been wondering how to get rid of credit card debt? Let’s face it. If you’re anything like me, the lure of easy money can call your name especially when you’re looking for a little high from some retail therapy.
Or maybe you’ve just had a string of bad luck. Either way, it isn’t hard to end up with credit card debt. What you need to do now is make it go away, and I’m going to show you how.
How I Paid Off $7 Grand in Just a Few Months
Years ago, I came face-to-face with the reality that I owed $7 grand in credit card debt. It wasn’t so much that I was an out of control spender, I was just making up for lost time.
When I was in college, I was really poor. I mean no extra money for anything. That meant I didn’t go anywhere and I didn’t go out at all. Fast forward a couple of years after I graduated, and got a “real” job, and all of a sudden, I had extra money.
At least it felt that way…
I was making the monthly payment, but I wasn’t getting anywhere.
Then I decided to make a change…
1.Inch by Inch – I took the credit card with the smallest balance which was around $250 and just bit the bullet and paid it off. I had the cash, so it made sense to do so.
The next month, I took the card with the next lowest balance and instead of just making the minimum payment, I upped the amount and then added the normal payment I would have made to card #1 I had just paid off.
Of course, I still made my normal payments to the other cards as well.
I did this until this card #2 was paid off in full – added the payment I would have made to card #1 plus a bit extra.
You can see where I’m going here…
Once card #2 was paid off I started on the card with the next lowest balance.
At that point, I took the normal payment I would have made on card #1 and card #2 and added it to card #3 plus a little bit more.
It doesn’t really matter how much the “little bit more is.” It can be another 20 bucks, but it does add up.
(I used the techniques in the book Your Money or Your Life to come up with the extra money each month.)
For example, say your minimum payment on card #1 is $25 a month and your minimum payment on card #2 is $37, and finally, your minimum payment on card #3 is $50, after you have card #1 and card #2 paid off, you can, at the bare minimum, start making payments of $112 to card #3.
Then if you can throw in a few extra dollars and make a payment of $125 or even $150 that will make a much bigger dent in your balance than simply making the minimum payment.
In fact, if you own $2,000 on a credit card with 18 percent interest and you make just the minimum payment each month, it would take you 30 years to pay it off! Not to mention you would end up paying $4,931 to pay off that $2000 dollar debt.
You don’t want to be handing over that much money to some credit card company that doesn’t give a hoot about you.
Anyway, if you continue on this way, you will get your credit cards paid off sooner rather than later, and it won’t be that painful.
It’s just important to remember to not start using them again. The bottom line is this when you are trying to get rid of credit card debt, you need to stay focused on the end goal.
How to Get Rid of Credit Card Debt Option 2 – A Personal Loan
2. A Personal Loan – There is a second way to get rid of credit card debt, if your debt is too big or too overwhelming to pay off like I did, or you don’t have any extra cash to squeeze out of your monthly income, you might consider a personal loan.
In case you don’t know, a personal loan is a loan that you get with just a signature. You don’t need to use collateral like your car or home. Instead, it is unsecured.
When you apply for a personal loan, you will either be approved or not based on your credit score.
Don’t mistake a personal loan for a payday loan or a car title loan. Do yourself a favor and stay as far away from those as you can! Interest rates can be huge and a very high percentage of people end up losing their car.
A personal loan, on the other hand, typically has lower interest rates than credit cards. Once you’re approved, you can pay off all of your credit cards and then just make one payment per month.
If push comes to shove, folks, it can be a life saver as the one payment will be lower than your credit card payments. You will also end up paying less in the long run due to the lower interest rates.
Even so, you need to be careful with personal loans. If you go this route, pay off your credit cards and then use them again, you will end up in a much worse place than you are now.
Personally, I highly suggest going with the first option. It takes a bit more discipline, but you have more control over the situation, but if that won’t work for you, then you might want to consider a personal loan.
Either way, I can tell you from my own personal experience, when you get rid of credit card debt, you’ll feel soooooo much better once those cards are paid off in full!
(Before you go, why don’t you sign up to receive my free Easy Peasy Budgeting Cheat Sheet. Just click the, “Click to Download,” button now.)