Find solutions for paying off credit card debt faster without wasting money on interest charges.
6 minute read
Wondering how to pay off credit card debt faster? Let’s face it – credit card debt can wreck your budget. When you overcharge, the bills take up a larger percentage of your income, leaving you with little to cover other expenses. At the same time, every time you carry a balance from one month to the next, you face high interest charges. These can eat up over half of your minimum payments, even on a low interest rate credit card.
Is credit card debt keeping you from success? Learn how to get your debt under control.
Method 1: Balance transfer credit card
Interest-free payments are the fastest way to pay off credit card debt.
If 100% of every payment you make goes to eliminating principal, you can pay off credit card debt fast. The easiest way to get interest-free payments is to use a balance transfer credit card. This will give you 0% APR for 6 to 18 months after you open the card. However, once the promotion period ends, regular interest charges will apply to whatever balance you have left. Only transfer as much debt as you can afford to eliminate.
Ideal for: $5,000 or less in credit card debt
Balance transfers are usually the best option in this situation. Even with fair credit, you can qualify for a card that offers 0% APR for at least 6 months. That gives you six months to pay off your debt interest free. To eliminate a $5,000 transferred balance in full before the regular APR for balance transfers kicks in, you’d need payments of about $835.
Method 2: Credit card debt consolidation
If the minimum payment requirements for your credit card debts are too high, consolidate!
Debt consolidation loans often lower your monthly payments. However, since it also reduces your interest rates, you can get out of debt faster even though you pay less.
If you use a debt consolidation loan, then the term you choose determines the monthly payment requirement. Choosing a longer term will lower the monthly payment. Most lenders will let you go up to a 48 or 60-month term on a consolidation loan. This can significantly cut your monthly payment requirements.
Ideal for: Up to $25,000 in credit card debt
If your total monthly credit card payments are too high prior to consolidation, you may need to opt for a personal loan with a longer term. In this case, a 3 or 4-year term may be the best solution to give you lower monthly payments, while still allowing you to get out of debt faster. It’s also worth noting that this is only the best solution if you have good credit (700 FICO or higher).
Method 3: Debt Management Program
For huge credit card debt balances, you need some help to reach zero.
If you want to pay back everything you owe to avoid credit score damage, you should use a debt management program. With a debt management program, a certified credit counselor will help you negotiate with creditors and consolidate your monthly payments into one check that goes to the credit counseling agency. Once everything is paid off in full, the program ends and your accounts may be closed.
Ideal for: Over $25,000 in credit card debt OR if you have bad credit
If you owe more than $25,000 or you have a bad credit score, then do-it-yourself debt consolidation solutions probably won’t work. That means you can skip balance transfers and debt consolidation loans because they won’t be effective.
Debt management can help you eliminate high volumes of debt within four to five years. In fact, it can often help with huge credit card debt balances – $100,000 or more. Although some credit counseling agencies cap their programs at $100,000, there are companies that have no cap.
Is your credit rating holding you back? Find out how to fix it.
Method 4: Debt Settlement
If you don’t care about credit damage and simply want a fast exit to avoid bankruptcy, go for debt settlement.
Debt settlement allows you to negotiate with creditors to pay back less than what you owe. If you are only dealing with one account, you may be able to handle a settlement negotiation on your own. Multiple accounts will be easier to tackle with a debt settlement program that will negotiate on your behalf.
Each debt you settle will remain as a negative item on your credit report for the next seven years. Only take this route if you have to.
Method 5: Declare Bankruptcy
If you have absolutely no money to pay off credit card debt you legitimately owe, then you need to declare bankruptcy.
This is the only way to get out of debt without potentially paying anything at all. And even in this case, the court will try and find a way for the creditor to recoup at least some of their losses. They will try to liquidate assets if you go through Chapter 7 or set up a court-ordered repayment plan in Chapter 13. And some debts, such as federal and private student loans are protected from discharge, meaning bankruptcy may not eliminate them. So, even in bankruptcy, have the right expectations about getting out of debt carte blanche.
Smart tips to boost your debt repayment strategy
Tip #1: Never rely on minimum payments
If you think you can pay off credit card debt making only minimum payments, think again. Minimum payment schedules are not designed to get you out of debt. Interest charges are one of the main ways that credit card companies make their money. So, it’s in their best interest for you to stay in debt for as long as possible. That’s more revenue for them!
You always want to pay as much as you can afford, so that you pay off your debt as quickly as possible. Using the solutions above will usually make it faster and easier to pay off your debt.
Tip #2: Stop charging!
The biggest mistake that most people make when they pay off credit card debt is that they don’t stop charging on the card. If you’re dumping water into the boat at the same time you try to bail it out, you’ll never get anywhere.
This may sound like common sense, but avoiding the use of the card can be hard to do in practice.
Tip #3: If one solution isn’t working, try another
Basically, if one option for repayment isn’t working, you should move onto the next. Don’t wait for the first solution you try to fail. As soon as you feel like there’s trouble on the horizon again, adjust your strategy. But in any case, avoid missing payments or falling behind. Once your creditor writes off a debt due to nonpayment, it limits the options you have for relief. No matter what, if your debts are current, you have options for eliminating them quickly without damaging your credit.
Tip #4: You may be able to eliminate other types of debt, too
Many solutions to pay off credit card debt can be used to pay off other types of debt, too. This is particularly true with a debt consolidation loan or debt management program. In both cases, you may be able to include:
- Unpaid medical bills
- Payday loans
- Store credit accounts for furniture or electronics
- Other unsecured personal loans
Debt consolidation loans can also include things like unpaid federal or state back taxes. The more debts you include in your elimination strategy, the better. Ideally, the only thing left after you use one of these repayment strategies should be your mortgage, auto loans and student loans. For student loans, you can use a separate repayment strategy to eliminate those debts faster, too.
Tip #5: Know when it’s time to Say “Uncle”
Let’s be honest. Nobody wants to declare bankruptcy, but sometimes it’s the best option. Unfortunately, most people wait too long to pull the plug. Our resident expert, Steve Rhode – the Get Out of Debt Guy – is a huge proponent of filing for bankruptcy so you can turn the page and get a fresh financial start.
“Whether it’s out of pride or shame or fear, most people wait too long to file for bankruptcy, and it’s usually for emotional reasons instead of practical, financial ones,” Rhode explains. “The truth is, you can actually damage your credit worse by trying debt solutions that don’t work, than the damage you would have had if you just filed for bankruptcy. Bankruptcy can also help you get to a fresh start sooner. Instead of two to five years spent struggling to get out of debt, if you qualify for Chapter 7, you could be debt free this year. That gets you to rebuilding much faster than if you muddle along because you don’t want to file.”
So, while these solutions for paying off debt can be beneficial, if you’re still not making headway, then it may be time to Say “Uncle”. If you’re missing payments and more and more of your accounts are becoming delinquent or getting charged off, then don’t wait to file.
Do you owe a lot to the IRS and fear you won’t get caught up? Take a look at our solutions.
Published by Debt.com, LLC