These People Had a Collective $250,000 in Debt. Here’s How They Paid It Off
Let’s face it: Credit card debt is a bummer.
It’s a thorn in your side, a chain around your ankle, a roadblock on the superhighway of life. And the deeper into debt you go, the more it can seem like a bottomless black hole from which you’ll never escape.
It can be done, though — just take it from these people.
Collectively, they were a quarter-million dollars in debt. Follow their examples to finally pay off your debt, too.
1. Katherine Consolidated Her Credit Card Debt
While you’re stressing out over your debt, your credit card company is getting rich off those high-interest rates. But a company called Credible could help you pay off that bill as soon as tomorrow.
Take Katherine, for example. She worked at a digital security startup in San Francisco and had $12,000 of credit card debt weighing her down.
She was paying 15.24% interest to her credit card, which isn’t uncommon. Instead of continuing to financially tread water, Katherine refinanced her debt.
Here’s how it works: You get a personal loan with a lower interest rate, then you use the money to pay off all your credit cards. You’ll then simply make monthly payments to repay the loan. It could lower your monthly payments and help you pay off that debt a lot faster.
Katherine saved $12,000 in interest by refinancing.
Credible won’t make you stand in line or call a bank. And if you’re worried you won’t qualify, it’s free to check online. It takes just two minutes, and it could save you thousands of dollars. Totally worth it.
2. Angela and Saskia Used the Debt Avalanche Method
South African couple Angela and Saskia Horn were $95,000 in debt.
They had a maxed-out credit card, a bank loan, a bank overdraft at its limit, two car loans and a mortgage.
They sold off possessions and embraced minimalist living. They also followed the “debt avalanche” method (also known as “debt stacking”), paying off the debts with the highest interest rates first.
Think of it as killing off your most toxic debt first — your most poisonous, radioactive, money-eating debt.
To get rid of your credit card debt this way, rank your credit cards by interest rate, from highest to lowest.
Here’s an example. (Note to readers: I am totally making these interest rates up.)
- Chase Visa — 22% interest rate — $5,000 balance
- Bank of America MasterCard — 19% — $3,000
- Citibank Visa — 13% — $7,000
- Capital One MasterCard — 8% — $1,000
Each month, make the minimum required payment on each card.
Then, use all your remaining available cash to pay off the card with the worst interest rate. Once you’ve wiped out that balance, move to your next target.
This technique requires patience, but can save you significant money in interest payments.
And the more interest you pay off, the more momentum you gain — like an avalanche rolling downhill.
3. Cort and Katelyn Used The Debt Snowball Method
Cort and Katelyn Pincock, a married couple with two babies in Idaho, were $60,000 in credit card, student loan and medical debt.
They paid it all off in a year.
To do so, they took night jobs and side gigs. They also used the “debt snowball” method. Here, you’re still focusing on eliminating one credit card at a time, but you’re getting rid of the lowest balance first.
With this method, you’d rank those same four credit cards in a different order:
- Capital One MasterCard — $1,000 balance — 8% interest rate
- Bank of America MasterCard — $3,000 — 19%
- Chase Visa — $5,000 — 22%
- Citibank Visa — $7,000 — 13%
Once again, pay the minimum on each card, and use your leftover money to pay off the smallest balance. Once you’ve knocked that one out, move on.
The downside: In the long run, you’ll end up paying more in interest. The upside: Wiping out each credit card balance will give you a “quick win” and pump you up to keep tackling your debt.
4. Lisa Got a Balance Transfer Card
Lisa Rowan, a personal finance writer, was $50,000 in debt, but she managed to pay off $30,000 of it in a matter of 18 months.
How? She hustled her butt off, snapping up as many side jobs as she could. And she played the balance-transfer game, which could also be an option for you.
If your credit is good, apply for a zero- or low-interest credit card. To entice you, these cards will offer a super-low interest — for a certain period of time. Transfer the balance from your high-interest cards to your new card.
Obviously this step will not magically get rid of your credit card debt all by itself. Your credit card debt is still stubbornly sitting there, now occupying a different piece of plastic.
However, like Rowan, you could be saving some serious coin on interest payments, freeing up cash to pay down your debt.
5. Kyle Negotiated His Bills Down
Kyle Taylor, founder of The Penny Hoarder, used to be drowning in $10,000 of credit card debt.
He did different things to pay it off. Among those strategies: He negotiated down his monthly bills.
You’re paying off your credit card balances with the same pot of money you’re using to pay your other bills. Why not try to cut down those other costs so you’ll have more money to apply to your credit card debt?
The absolute worst-case scenario: Nothing changes, and you just keep paying what you’re already paying now.
OR, you could end up freeing up some money. You’ll never know unless you try.
Bottom line: These are five ways to start paying off your debt. It’s time to get serious about slaying the credit card dragon!
Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder.