Small loans to pay off credit cards

How To Pay Off Credit Card Debt Quickly

Small loans to pay off credit cardsSo you have a boatload of credit card debt and you want to pay if off as quickly as humanly possible. Well for starters, that’s an excellent attitude to have! Paying interest on credit card debt is very expensive and should be avoided if possible …

Let’s say you had a $10,000 balance at an 18% APR. The minimum payment is usually interest + 1% of balance (to put that in perspective, that would be $250 for the first month in this scenario).

Under those circumstances, it would take you 342 months to pay off the entire balance, and you would have paid an extra $14,423.30 in interest! So that $10,000 balance actually cost you a total of $24,423.30!

Some banks have a different formula for calculating the minimum payment, but you get the idea… interest payments are a totally preventable rip-off. Here are seven techniques for how to pay off credit card debt fast…

(1) Prioritize your credit card debt

First and foremost, if your debt is spread across multiple cards, organize them from the highest APR to the lowest APR. Then you will want to make sure you really focus on using the techniques below to wipe out the debt on the highest-rate card(s) first. An alternative strategy, for those seeking a quick win and a way to create some positive momentum is to pay down your card with the smallest balance first. While not as financially efficient it can be a great way to get the ball rolling.

(2) Reduce (or eliminate) your interest

If you’re taking a lump sum from your savings to pay off credit card debt fast (like this week) then this advice that follows won’t be applicable to you. However, if it looks like it’s going to take you at least a few months to completely eliminate your credit card debt, keep reading.

Chopping your interest rate is a crucial step in fast tracking your journey out of debt. Because whatever techniques you are using in your journey to be debt-free, it will be even faster if interest isn’t accumulating so rapidly.

There are basically two ways to do this. You can call up customer service for your credit cards and plead for a lower rate. Sometimes they will knock off a couple points, but these days they will rarely give any sizable reduction.

The second option is to use balance transfer credit cards. Sure, you will have to pay a balance transfer fee of 3 percent to 5 percent of the balance, but if that means having 0% interest for 12 to 18 months then it’s probably worth it (just do the math to make sure). You definitely have to use discipline when taking a holiday from paying interest – but that’s the perfect time to double down and pay down principal. Check out our constantly updated listing of 0% balance transfer cards to see what deals are available right now.

So, as long as it won’t encourage you to procrastinate in your repayment 0% balance transfer offers are a smart option.

(3) Reduce your monthly spending

Look for expenses in your monthly budget you can trim or even eliminate completely. The gym membership may not be worth it if you go only a couple times per month… instead go running in the park or exercise at home.

The biggest money drain for most Americans is eating out. It’s easy to get in the habit of dining out once or twice a week… over the course of a month that equals a lot of money that could be used for paying down credit card debt. Even fast food costs add up quickly – buying a $2.50 coffee five days a week equals around $650 per year!

Need an easy motivator to spend less? Just remind yourself this; Every $1 less you spend saves you up to $2.50 in credit card debt.

(4) Sell stuff you don’t need (and stop buying it)

Yes, selling stuff you think you need can be painful, but it’s best for you in the long run.

The American culture seems to be obsessed with the idea of accumulating stuff we don’t actually need. All of us are guilty of it to at least some degree. Whether it’s collectibles, gadgets, handbags, or something else… they’re all things you don’t really need.

So go to your closet/garage/basement and identify the things you could really do without. Then hit up eBay and Craigslist to get rid of them and raise some quick cash. For many people (given how much unused stuff the average American has) this step in and of itself might be all that’s necessary to pay off your credit card debt. One forum poster decided to sell his snowmobile and it ended up being enough to pay off all his credit card debt!

Understanding this concept is without a doubt one of the most important techniques for how to pay off credit card debt… and how to prevent racking up new debt in the future!

(5) Get a second job or weekend job

The quickest way to pay off credit card debt is to increase your income… but of course that’s easier said than done! However it is possible.

If you work an hourly job, plead with your boss to see if there’s any way you can pick up some extra hours. Even offer to pick up crappy shifts, if necessary. I recommend being honest about why you need to do this… you’re paying off credit card debt. If the debt was incurred from something like medical bills, don’t feel bad about playing up the sympathy card.

If you have a salaried job, then outside of a raise or promotion there probably won’t be any way you can increase your pay. So what you will want to look into is getting a second job, even if it’s only for the weekends. Sure, it may only earn you a few hundred dollars extra per month, but that’s all money you could be using to pay off debt faster.

(6) Earn 1% on a savings account while paying 15% on credit card debt?!

It’s unbelievable how many Americans carry credit card debt at 10 percent to 20 percent (or higher!) while they keep money in their bank account that is only earning them 1% or less.

Sure, we all need back-up funds for emergencies, but this is where you need to weigh the pros and cons. Figure out how much cash you comfortably need on hand for things like mortgage/rent (that you can’t pay with credit cards). For everything else – like unexpected car repairs – you can probably pay with a credit card if need be, so why keep that money in the bank when it could be used to pay off credit card debt and save you money on interest?

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Small loans to pay off credit cards

Small loans to pay off credit cards

Small loans to pay off credit cards

Small loans to pay off credit cards

Small loans to pay off credit cards

Small loans to pay off credit cards

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Using a Personal Loan to Pay off Credit Card Debt

Small loans to pay off credit cards

If you have fairly good credit but high balances on your credit cards, it may seem like a great idea to take out a personal loan to pay off those cards. But depending on your debt payoff plan, using a personal loan to pay your credit cards could be like robbing Peter to pay Paul. Here are the issues you need to consider before taking out a personal loan to pay off your credit card balance:

How did you run up your balance?

Small loans to pay off credit cardsIf you had to use a credit card to pay for a major medical expense or other big bill outside of your control, using a personal loan to pay off the balance could potentially be a savvy way to lower your interest rate. After all, using a personal loan to clear your credit card debt is basically just exchanging one debt for another. If you can trust yourself not to get right back into credit card debt and you know that your high balance was a one-time anomaly, then a personal loan might be a good way to give yourself a little more control over your interest rate, your pay-off date, and your monthly payment.

But if your credit cards are out of control because you have difficulty keeping a tight rein on your spending, then using a personal loan to pay them off could really hurt your finances. Having your cards at a 0 balance could provide you with far too much temptation while you’re still paying off your last spending spree.

One decided benefit to shifting your debt from a credit card to a personal loan is the reduction in the interest rate. Depending on your credit score, interest rates on personal loans will almost always be lower that those on credit cards, which means you will end up spending less on your debt over the life of the loan. Although I have seen people effectively use balance transfer credit cards to get 0% interest for 12-18 months and make big dents in their overall debt.

Loan Term and Monthly Payments

A big difference between a credit card and a personal loan, however, is that the loan will have a specified loan term—generally no more than five years. Credit cards, on the other hand, have no specific amount of time within which you must pay off your balance (although the Credit CARD Act of 2009 does require card issuers to make sure the minimum amount due is high enough to make pay-off feasible within a reasonable time frame.)

What this means is that “shortening” your loan term could raise your monthly payment—potentially to a point where you might find it difficult to pay.

On the other hand, however, if you are able to “lengthen” your loan term, you might be able to lower your monthly payment and still pay less overall because of the lower interest rate. This, of course, would be the absolute ideal situation, but it might require some homework to find a loan that could do all that.

Using a personal loan to pay off credit card debt could potentially be a great tool for managing your credit card debt. But whether that tool will help or harm your finances depends upon both the terms of the loan and your ability to be disciplined about keeping your credit card spending in check. If you decide this is an option for you, then here are some tips on taking out a personal loan.

5 Ways to Pay Off High Interest Credit Card Debt

Small loans to pay off credit cards

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Credit card debt is one of the most costly forms of debt, with interest rates between 20% and 30% in some cases. (Cardholders who have missed a payment might even incur higher penalty rates.) In contrast, secured loans such as car loans and home mortgages can have far lower rates. And unlike a home mortgage or student loans, interest on credit card debt is never tax deductible.

So as with any costly loan, your first priority should be paying it off as soon as possible. And even if you have to take out another loan to do so, you can save money when you are able to transfer your debt to a new account that has a lower interest rate than your existing credit card balances.

Here are five ways that you can pay off your high interest credit card debt.

1. Credit Card Balance Transfer

If you have a balance on a high interest credit card, you can save money by transferring it to a card with a lower interest rate. Better yet, some cards offer 0% APR promotional financing on balance transfers for a limited time, from six to as long as 21 months. Most cards will impose a balance transfer fee of 3% to 5% of the amount transferred. However, there are cards available that offer balance transfers with no fee. These balance transfer offers are your best way to eliminate interest charges while you pay down your debt.

Many banks and credit unions are willing to offer personal loans to applicants with good or excellent credit. So long as the interest rate offered is lower than your credit card balance, you can use these loans to pay off your credit cards and reduce your interest costs. However, the best rates will only be available to those who have excellent credit. If you have poor credit and a lot of debt, you may not be approved for a loan with a lower interest rate than the one you currently have.

It's possible to loan yourself money from your 401K so that you can pay off your high interest credit card balances. When you withdraw money from your 401K account, you can pay yourself back over as long as five years using very competitive interest rates that will be lower than nearly all credit cards. And since you are essentially acting as your own lender, there is no need to have excellent credit. On the other hand, you will be missing out on the compound interest your investments would have earned, and you will face tax penalties if you fail to pay the back the loan on time.

There are some types of whole, universal, or variable universal life insurance policies that allow you to take out a loan against them. Any money you withdraw is then deducted from your death benefit. And while interest rates can be below that of high interest credit cards, any unpaid interest will be added to your loan amount and subject to compounding. Just like a 401K loan, you are borrowing from your own funds, so your current credit rating will be irrelevant.

If you have equity in your home, you may be able to borrow money against it for any purpose, including paying off your high interest credit cards. Current interest rates for home equity lines of credit are below 5%, which is far better than any standard credit card's interest rate. Your ability to secure a home equity line of credit will depend on your home's debt to credit ratio as well as your current credit history.

Have you ever borrowed at a lower rate to pay off high interest debt?

Using No-Interest Credit Cards to Pay Off Student Loans

Small loans to pay off credit cards

Money Girl explains whether transferring student loan debt to credit cards is a smart move for your personal finances.

Small loans to pay off credit cardsA podcast listener named Sandy asks:

"I have $52,000 in student loans that charge 6.8% interest. Is there any drawback to transferring some amount of my debt to no-interest credit cards if I pay them off before the interest rate goes up?"

No matter if you need to pay off debt for school, a car, or a trip around the world, you may have wondered whether using a zero-interest credit card could help you save money.

In this episode we'll cover everything you need to know about transferring student loan debt to credit cards and if it's a smart move for your personal finances..

What Is a No-Interest Credit Card?

One of the easiest ways to save money on debt is to reduce the interest rate that you have to pay. That’s where a no-interest credit card, also called a balance transfer card, can really come in handy.

These zero-interest offers allow you to move debt, in an amount up to your credit limit, to a new or existing credit card account. You can make the transfer online or using a paper check. They charge no interest during a promotional period, which generally lasts from 6 to 24 months.

But after the promotion ends, your interest rate will go up, depending on factors like your credit score and the going interest rate. Additionally, being late on a monthly payment could also cause your rate to skyrocket.

So, the key to using no-interest cards successfully is to pay them off in full before the promotion expires. If you don’t, you could end up paying an interest rate that’s much higher than if you hadn’t done the transfer in the first place.

Also, you’re typically charged a fee that ranges from 3% to 5% of the amount you transfer that gets added to your balance. Therefore, if you’re not completely sure that you could pay off the entire balance in time, doing a balance transfer is not a wise financial move.

How a No-Interest Credit Card Saves You Money

Small loans to pay off credit cardsTo know if a no-interest credit card could save you money, you’ve got to do the math. Compare the fees you’d pay if you did a balance transfer against the interest you’d have to pay if you didn’t.

Microsoft Office has a free amortization template for Excel that you can download. You simply add your loan information and see how much interest is left to pay. Or you can use the Credit Card Optimizer Calculator at if you’re looking to transfer just credit card debt.

If a zero-interest transfer makes sense, a smart way to manage it is to divide the balance by the number of months in the promotion. For instance, let’s say you transfer $4,000 from a high interest car loan and also have a 3% transfer fee tacked on.

Your new balance would be $4,120 (($4,000 x 3%) + $4,000). Dividing that amount by 24 months shows that you’ll have it paid off by the end of the promotional term and won’t have to pay a penny of interest, if you pay $172 per month.