How to pay off $20,000 in credit card debt
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If you’re juggling a large amount of credit card debt — say $20,000 — managing multiple high-interest balances and payment due dates can be stressful.
By planning ahead and using certain debt repayment strategies, it is possible to eliminate your credit card balances. here’s how pay off $20,000 in credit card debt.
A personal loan is a tool to pay off high interest credit card debt. Credible allows you view your prequalified personal loan rates from various lenders, all in one place.
How to pay off $20,000 in credit card debt
Switch to cash or debit card
While credit cards can help you build credit, if you can’t afford to pay off your balance in full each month, you can end up with costly interest charges that increase your debt.
Reducing your credit card usage by making purchases with cash or a debit card can help you avoid racking up additional debt on your credit card. You can reserve credit card usage when needed for added security, such as online shopping.
If you have credit card debt, the advantage of using a debit card is that you make purchases with your own money. Because of this, you won’t have to worry about spending more than you can afford or having a balance that will earn interest.
Visit Credible for compare personal loan rates from various lenders, without affecting your credit score.
Set achievable goals
As tempting as it may be to spend every spare dollar paying off your credit card debt, progress can be much more sustainable if you set achievable goals.
Starting small can make the challenge of paying off your debt more manageable. Start by setting a schedule for paying off one card (while making minimum payments on your other debts). Then you can rinse and repeat the process for the rest of your credit cards.
Consider these two debt repayment strategies to help you pay down and eliminate your credit card balances:
- Debt Snowball Method — You’ll concentrate all the extra payments you can afford to make on your credit card with the lowest balance, while making minimum payments on your other cards. Once you have paid this card, you will pay this amount on the card with the lowest balance, and you will repeat this operation until you have paid off all your debt. This strategy can be motivating if you like to have quick gains.
- Debt Avalanche Method — This method helps you save more on interest, but it may seem less motivating because you won’t see your balances disappear as quickly. With the debt avalanche method, you’ll focus on paying off the card with the highest interest rate first. When that card is paid off, you switch to the one with the highest interest rate, and so on.
DEBT SNOWBALL METHOD VS. AVALANCHE OF DEBT: WHAT’S THE DIFFERENCE?
Paying off your debts requires a lot of work and willpower. Having accountability as part of your debt repayment strategy can make it easier to stick to your plan.
Consider asking a friend or family member to be your duty buddy. You can also work with a nonprofit credit counseling agency, which will help you develop a plan to pay off your credit card debt and hold you accountable for your progress.
Should you take out a personal loan to pay off $20,000 in credit card debt?
Whether you should take out a personal loan to pay off $20,000 in credit card debt is an individual decision, but it can be a useful debt consolidation tool for many reasons:
- Lower interest rates — Personal loans tend to have lower interest rates than many credit cards, which can save you money on interest when paying down your debt.
- Final payment date — When you take out a personal loan, you have a clear end date for loan repayment. It can be motivating and help hold you accountable.
- Fixed rate that will not change — With a personal loan, you’ll benefit from a fixed interest rate that won’t change, making it easier to budget your monthly payments.
- Easy-to-track payment — Having just one payment to track can make your debt more manageable. You can also set up automatic payments to make sure you never miss a payment.
If you have bad credit, it may be more difficult to qualify for a personal loan (especially one with lower interest rates than what you pay on your credit cards). But adding a co-signer with good credit to your loan application can help increase your chances of approval and can help you get a lower interest rate.
If you’re ready to apply for a debt consolidation loan, Credible makes it quick and easy compare personal loan rates to find the right one for your situation.
Should you use a balance transfer card to pay off credit card debt?
Using a balance transfer credit card — especially if you can qualify for a 0% APR introductory offer — is another way to pay off $20,000 in credit card debt. But it takes some discipline.
Some balance transfer credit cards offer 0% APRs for 18 or 21 months. If you can focus on paying off your debt within that time frame, all of your payments will go toward your principal and you won’t accrue additional interest. But if you still have a balance when the introductory period expires, you’ll start earning interest at the card’s normal rate, which can be just as high (if not higher) than what you were paying on your cards. existing credit.
Even if you have credit card debt of $20,000 or more, you should only consider bankruptcy or debt settlement as a last resort.
- Bankruptcy – Depending on the type of bankruptcy you file (Chapter 7 or Chapter 13), you may either have certain debts fully discharged or make a plan with the court to pay off your debt. Bankruptcy can damage your credit and stay on your credit report for up to 10 years, which can make it difficult to buy a home or get approved for additional credit products.
- Debt settlement — Debt settlement companies say they can negotiate with your creditors on your behalf to reduce or even settle your debt. But they can charge high fees, your creditors might not be willing to negotiate, and there’s no guarantee your debt will be settled. Using a debt settlement service can also have a negative effect on your credit.